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https://www.courtlistener.com/api/rest/v3/opinions/1543219/ | 39 F.2d 43 (1930)
BLAIR, Commissioner of Internal Revenue,
v.
WILSON SYNDICATE TRUST.
No. 5641.
Circuit Court of Appeals, Fifth Circuit.
March 26, 1930.
Sewall Key and Harvey R. Gamble, Sp. Assts. to Atty. Gen., C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and P. S. Crewe, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., for petitioner.
*44 Alex F. Weisberg, of Dallas, Tex. (Thompson, Knight, Baker & Harris, of Dallas, Tex., on the brief), for respondent.
Before BRYAN and FOSTER, Circuit Judges, and DAWKINS, District Judge.
FOSTER, Circuit Judge.
Respondent, through the trustee, filed fiduciary return for the years 1921, 1922, and 1923, showing no income taxes due. The Commissioner of Internal Revenue, on the theory that respondent was not an ordinary trust but should be classed as an association, taxable in the same manner as a corporation, determined deficiencies for the respective years of $9,359.44, $20,563.97 and $15,554.70, and in addition imposed a penalty of $2,339.88 for the first year. On appeal, the Board of Tax Appeals reversed the Commissioner. 14 B. T. A. 508.
Stated as briefly as possible, the material facts as found by the Board, which are not in dispute, are these:
J. B. Wilson, a resident of Dallas, Tex., died testate on January 27, 1920, leaving a large estate composed entirely of community property. He was survived by his widow, Laura D. Wilson, and by his five married daughters. His widow declined to take under the will, the estate was partitioned, and she received one-half of the community property of the approximate value of $1,000,000. After receiving her share of the community property, Mrs. Wilson divided her personal property in kind among her daughters. She was advised and believed that her real estate could neither be equitably divided nor sold to advantage. Desiring to make further provision for her daughters, on May 21, 1920, she executed a deed naming two of her sons-in-law as trustees and conveying to them all her real estate for the benefit of herself, in the proportion of two-sevenths, and her five daughters, in the proportion of one-seventh each.
The trust deed gave the trustees full power in the administration and disposal of the property, and directed them to sell or otherwise dispose of it as rapidly as could be done to advantage and to distribute the proceeds to the beneficiaries, the trust to continue until all the property was disposed of, but not exceeding fifteen years, at the end of which period any property remaining was to be partitioned.
If necessary to advantageously dispose of the property or to protect it, the trustees were empowered to purchase controlling or adjacent property and to erect buildings, the new property to become part of the trust estate. They were also authorized to continue existing agreements as to the property.
The trust deed provided that the trustees might resign at any time or be removed by a majority of the beneficiaries with or without cause. A majority of the beneficiaries might also fill vacancies in the office of the trustee.
The trust deed further provided that at any time all the beneficiaries might request the trustees to terminate and close the trust, upon which request the trustees were required to settle their accounts and convey to the beneficiaries their undivided interests in the trust property.
The first trustees resigned on October 31, 1921, and the City National Bank of Dallas, Tex., was appointed sole trustee by all the beneficiaries. At the same time, by an agreement, to which the bank was a party, the provisions of the trust deed were modified to restrict the power of the trustees, in that certain working agreements with joint owners of some of the items of real estate should not be disturbed; that the trustee should not sell any property nor reduce the rentals or leases in a building known as the Wilson building without the approval of a majority of the beneficiaries; that the trustee should not purchase property or make improvements, other than necessary repairs, except on the approval of five-sevenths of the beneficiaries; that the trustee might be removed and vacancies filled by five-sevenths of the beneficiaries instead of a majority. A schedule of fees to be paid the trustee on sales made, in addition to an annual compensation of $5,000, was fixed. The trustee agreed to make advances, consistent with its banking powers, at not exceeding 7 per cent. interest.
The trust deed covered an eight-story building known as the Wilson building and a twelve-story building known as the Annex. The first two stories of the Wilson building and the entire Annex were rented to a tenant by a lease having twelve years to run. The other stories of the Wilson building were rented as offices to various tenants. The trustee executed a lease for 25 years on said two stories of the Wilson building and all of the Annex to begin at the expiration of the existing lease.
The trust deed also covered undivided interests in two properties, one known as the Washington Theatre, and the other being property on the corner of Maine and Murphy streets in Dallas. Fred P. Wilson owned a one-half undivided interest in the first-named property and an undivided one-fourth interest *45 in the second. He managed the properties and collected the rents, accounting to the trustee. Another item covered by the trust deed was an undivided interest in a building known as the Elks building. G. H. Schoellkopf owned an undivided one-half interest in this building and managed it, accounting to the trustee. The interest of the trust estate in the Elks building was sold by the trustee in 1922, and the interest of the trust estate in the Washington Theatre building was sold in 1927, and the profits of both sales were distributed in accordance with the terms of the trust.
The trust deed covered a one-third undivided interest in a ranch in Parker county, Tex., known as the Eddleman ranch, consisting of 3,262.3 acres, which belonged to a partnership, composed at the time of his death of J. B. Wilson, W. H. Eddleman, and James H. Furneaux, each in the proportion of one-third. There was owing to Mrs. Wilson by each of the other partners of her husband the sum of $29,567.91, for their respective one-third interests. The trust deed also covered an undivided two-thirds interest in a ranch in New Mexico, consisting of 85,603.72 acres, which belonged to a partnership composed of J. B. Wilson at the time of his death and J. H. Furneaux. Furneaux's interest was one-third, but he had not paid for it. At the time of the death of J. B. Wilson, there was in effect an agreement by which James H. Furneaux was to manage and operate both ranches, Wilson to advance such money as might be needed for the conduct and operation of them and Furneaux to turn over to Wilson such share of the net proceeds as he was entitled to. This contract had about three years to run, and was continued by the trustee until its expiration in May, 1923, at which time it was renewed by the trustee for five years. It was found that the breeding and raising of cattle on these ranches was not profitable, and they were changed to sheep ranches. A dam was built on the New Mexico ranch, at an expense of $50,000, which turned out to be a failure. The trustee advanced the necessary funds for the changing of the ranches from cattle to sheep, for building the dam, and for other expenses incident to their operation.
The trustee from time to time made efforts to find purchasers of the trust properties on advantageous terms, but, except as to the sale of the interest in the Elks building and Washington Theatre building they were unable to do so. However, they traded property known as the North Texas building, a six-story building in Dallas, for 20,000 acres of ranch land in Randall and Deaf Smith counties, Tex. An arrangement was made with J. H. Furneaux for the operation of this ranch in connection with the ranches in which he was interested.
The petitioner insists that on the above-stated facts the respondent is not truly a trust, but is an association, and therefore taxable as a corporation under the provisions of sections 2 and 230 of the Revenue Act of 1921 (42 Stat. 227, 252), under which this case arose.
It is contended that the test is whether the respondent was conducting a business and the beneficiaries had control of the trustees. To sustain this, a number of cases dealing with the doing of business are cited. They need not be reviewed as it may be considered settled, within the meaning of the taxing laws, that, if a corporation is doing that for which it was organized, for the purpose of earning profit, very slight activity is sufficient to constitute the doing of business. Flint v. Stone Tracy Co., 220 U.S. 107, 31 S. Ct. 342, 55 L. Ed. 389, Ann. Cas. 1912B, 1312. On the other hand, if a corporation is not organized for profit, but merely to hold real estate for ultimate disposal and liquidation, it is not doing business, although it incidentally collects the rents and distributes them. Zonne v. Minneapolis Syndicate, 220 U.S. 187, 31 S. Ct. 361, 55 L. Ed. 428; United States v. Emery, etc., 237 U.S. 28, 35 S. Ct. 499, 59 L. Ed. 825.
Reliance is also had on the case of Hecht v. Malley, 265 U.S. 144, 44 S. Ct. 462, 467, 68 L. Ed. 949. In that case the Supreme Court had occasion to consider the application of the corporation tax imposed by the Revenue Act of 1918 to three so-called Massachusetts trusts. The Revenue Act of 1918 contained a provision similar to the 1921 act classing "associations" as corporations. The Massachusetts trusts under consideration had many characteristics common to corporations. They were organized to do business for profit by agreement between the owners of certain designated property who became the beneficiaries. Transferable shares were issued. The shareholders, not necessarily the original cestuis que trust, could increase the number of trustees, change them at will, or by annual election, modify the declaration of trust, and terminate the trust. The Supreme Court held them to be associations, approving the following definition of the word "association." The court said: "The word `association' appears *46 to be used in the Act in its ordinary meaning. It has been defined as a term `used throughout the United States to signify a body of persons united without a charter, but upon the methods and forms used by incorporated bodies for the prosecution of some common enterprise.'"
The difference between the respondent and the Massachusetts trusts considered in Hecht v. Malley, supra, is very marked. The respondent was not organized for the purpose of doing business for profit, nor for doing business at all. Its purpose was to liquidate and distribute an estate. The beneficiaries, other than its creator, had no vested interest in the property and no voice in instituting the trust. They received their distributive portions purely as donations from their mother, and could not dispose of their interests, except by an equitable assignment of their rights, subject to the orderly administration of the trust. Such slight business activities as the trustee conducted were in furtherance of the ultimate purpose of liquidation and distribution. The similarity as to the provisions for terminating the trust, amending the deed, and removing and electing trustees are hardly material, as they are not unusual in express trusts.
The test urged by the petitioner has no application to the facts in this case. A distinction is to be made between an agreement between individuals in the form of a trust and an express trust created by an ancestor, although they may have some features in common. The controlling distinction is that one is a voluntary association of individuals for convenience and profit, the other a method of equitably distributing a legacy or donation. Congress has recognized this distinction, classing the former as associations, to be taxed as corporations, and at the same time providing for a separate and distinct method of taxing the income of estates and trusts created by will or deed, classing them together for that purpose. Section 219, Revenue Act of 1921 (42 Stat. 246).
It is not disputed that the respondent is a valid express trust under the laws of Texas, and it is not suggested that any provision of the deed is inconsistent with the general rules governing the creation of such trusts. The respondent does not come within the definition of "association" applied in Hecht v. Malley, supra. It is plain that it is truly a trust, and is to be so classed, and not as an association or corporation.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543238/ | 39 F.2d 743 (1930)
STAFFORD OWNERS, Inc.,
v.
UNITED STATES.
No. K-101.
Court of Claims.
April 7, 1930.
*744 *745 Chester A. Gwinn, of Washington, D. C. (Humphreys & Gwinn, of Washington, D. C., on the brief), for plaintiff.
Arthur J. Iles, of Indianapolis, Ind., and Charles F. Kincheloe, of Washington, D. C., for the United States.
Argued before BOOTH, Chief Justice, and WILLIAMS, LITTLETON, GREEN, and GRAHAM, Judges.
BOOTH, Chief Justice.
The Commissioner of Internal Revenue assessed against and collected from the plaintiff a capital stock tax of $450. A refund claim seasonably filed was denied, and this suit is to recover the tax paid, with interest thereon. No jurisdictional issue is involved.
The Revenue Act of 1921 (42 Stat. 227, 294) contains the following provisions:
"Sec. 1000 (a). That on and after July 1, 1922, in lieu of the tax imposed by section 1000 of the Revenue Act of 1918
"(1) Every domestic corporation shall pay annually a special excise tax with respect to carrying on or doing business, equivalent to $1 for each $1,000 of so much of the fair average value of its capital stock for the preceding year ending June 30 as is in excess of $5,000. In estimating the value of capital stock the surplus and undivided profits shall be included."
Section 700(a) of the Revenue Act of 1924 (43 Stat. 325, 26 USCA 223 note) is substantially the same.
The plaintiff was incorporated under the laws of Delaware in July, 1920. Since 1921 it has held the legal title to a co-operative apartment house at 1789 Lanier Place N. W., in Washington, D. C. The activities of the corporation are confined to a single purpose. The authorized capital stock of $95,250 is owned proportionately by sixteen apartment tenants, having been subscribed for by them on the basis of the ultimate purchase price of each individual's apartment; the enterprise itself being exclusively directed towards the purchase and ownership of an apartment, rather than the payment of a fixed rental for occupancy. The stock is nonnegotiable and nonmarketable; it possesses no earning power or loan value, and has never paid a dividend. The plaintiff holds the legal title to the premises for the convenience of the stockholders, each of whom has an equitable and beneficial ownership of all the apartments in the building. A person wishing to purchase an apartment in the building subscribes for the amount of stock representing the purchase price of the apartment chosen. If subsequently for any cause such a purchaser desires to sell his interest in the apartment purchased, it may be done by the assignment of the stock. A stock subscriber may also rent his apartment; the rent being paid to and received by the owner and not the corporation. A monthly assessment is laid against each stockholder sufficient in amount to discharge his pro rata obligation of the cost of janitor service, management, light, heat, repairs, water, insurance, taxes, interest, and amortization of mortgages. The corporation derives no substantial profit save an inconsequential amount of interest on bank deposits, and has no income from any source other than as above set forth. Its affairs, of course, are administered by a board of directors chosen by the stockholders, and its only salaried employees are the house manager and the janitor.
The apartment owned is known as "The Stafford." It was purchased in 1921; the issued capital stock representing the purchase price. The first and second trusts on the building have been gradually reduced from $56,400 in 1921 to $38,250 in 1926. From a monetary standpoint it is evident that the corporation plaintiff will not accumulate a surplus or undivided profits, and is absolutely precluded from offering capital stock to other than home seekers. In fact, the findings show that the corporate entity is nothing more than an adopted means to accomplish a co-operative purpose, which enables prospective purchasers to acquire a home by the payment of stated installments *746 upon the purchase price, rather than monthly rent for an apartment. It would seem to be without question the very character of a domestic corporation intended as exempt under the statute, in virtue of the law's provision taxing only domestic corporations "carrying on or doing business."
The statute involved has been many times before the courts. Without doubt each case is determinable from its own peculiar facts. In Edwards v. Chile Copper Co., 270 U.S. 452, 46 S. Ct. 345, 70 L. Ed. 678, and Von Baumbach v. Sargent Land Co., 242 U.S. 503, 37 S. Ct. 201, 61 L. Ed. 460, the Supreme Court construed the applicable provisions of the Revenue Act. The tax as therein held is an excise tax placed upon the privilege of incorporating. The language of the law indicates clearly the class to be subjected to the tax, and the question as to what is and what is not "carrying on or doing business" must be resolved from what the corporation actually does in the ordinary acceptation of those terms.
It is true, as the defendant insists, that the means adopted by the stockholders of the plaintiff corporation results in advantages to them. It does enable them to acquire by a gradual outlay an apartment; it serves to minimize expense in management, and probably results in the end in the purchase of a greater amount of space than it would otherwise cost them. However, may it be said that economical results co-operatively obtained, not by earnings but by savings, constitute business activities in the sense of the statute? In this case the single activity of the plaintiff is not to profit as an entity; the possibility of so doing is foreclosed to it. The entire conception of the organization is economical management, restricted to the single purpose of eventually owning the building, free from liens so that the stockholders may own their own apartments free from rent and the possibility of eviction. The case of the Edgar Estates Corporation v. United States, 65 Ct. Cl. 415, is not precisely in point. In that case the corporate activities were distinctly for a monetary profit to be accomplished by the judicious administration of various kinds of property, some of which exacted wise judgment as to investment and others to be made available for immediate sale, under circumstances when the same could not be accomplished by the individual owners as tenants in common. In the end, profits in the Edgar Estates Corporation were to accrue, i. e., money profits, to the stockholders. In this case the object of incorporation is not similar. On the contrary, the essence of the purpose is to avoid the earning of profits in a monetary sense and by an adopted method utilize the partial payments in the liquidation of incurred indebtedness, so that in the end the various stockholders may eventually own the building and their individual apartments. No part of the money exacted from the sixteen individuals interested goes to enrich cotenants. Each stockholder pays the full purchase price for his apartment, and the incentive for incorporation is to own a place to live, not to acquire income from a going concern organized on the basis of earning dividends for distribution to its stockholders.
We think the plaintiff is entitled to recover. Judgment for plaintiff for $450, with interest. It is so ordered. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543507/ | 55 B.R. 702 (1985)
In re Carl H. NEUMAN, d/b/a Lydia E. Hall Hospital, Syosset Hospital and Long Island Food Company, Debtor.
Carl H. NEUMAN, d/b/a Lydia E. Hall Hospital, Syosset Hospital and Long Island Food Company, Plaintiff-Appellee,
v.
BLUE CROSS/BLUE SHIELD OF GREATER NEW YORK, Defendant-Appellant.
No. 85 Civ. 6677 (RLC).
United States District Court, S.D. New York.
October 22, 1985.
*703 Lola S. Lea, P.C., New York City, for appellee.
Rudolph W. Giuliani, U.S. Atty., for the S.D. of N.Y., for appellant; Nancy Kilson, Asst. U.S. Atty., New York City, of counsel.
OPINION
ROBERT L. CARTER, District Judge.
Appellant, the Health Care Financing Administration ("HCFA") of the United States Department of Health and Human Services,[1] appeals from the August 6, 1985 decision of Judge Prudence Abram of the United States Bankruptcy Court and a series of orders issued pursuant to that decision dated August 8, 21, and 23, 1985. Judge Abram ordered disbursement of $406,800 in Medicare Trust funds to appellee, Carl H. Neuman d/b/a Lydia E. Hall Hospital, Syosset Hospital and Long Island Food Company, according to a specified payment schedule. On September 4, 1985, this court stayed these orders pending this appeal.
The history of this matter is a procedural morass. To limit further complication of issues, a September 4th order of this court enjoined further proceedings in the United States Bankruptcy Court related to In re Neuman pending the disposition of this appeal. For purposes of this appeal the procedural history is condensed to include only that which is relevant to the issues before the court on this appeal.
At issue on appeal is the contractual relationship between appellant, as administrator of Medicare funds, and appellee as a Medicare provider. Appellant argues that Judge Abram erred in her interpretation of a December 21, 1984 stipulation ("stipulation") between the parties. For the reasons stated below, we agree and the orders of the Bankruptcy Court are now reversed.
History
Appellee filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code on December 11, 1984. At that time, appellee owed millions of *704 dollars in Medicare overpayments.[2] Appellant was collecting these overpayments from two sources. First, appellant withheld $50,000 from each partial interim payment ("PIP"). These payments, made biweekly, cover anticipated expenditures for Medicare services rendered, based on estimates from previous expenses under the program. A retroactive adjustment made at the end of each reporting period reflects actual costs to the provider. 42 U.S.C. § 1395g; 42 C.F.R. § 405.454(j). In the event of an overpayment, the government withholds funds equivalent to the overpayment from future PIP payments. The second source of recoupment was appellee's year end Volume Adjustment. Adjusting for the high fixed costs of hospitals, these payments are disbursed annually to hospitals in New York State that have suffered a decrease in the average length of patient stays for the year, as compared with the 1981 base year. Appellant recouped the 1983 Volume Adjustment in its entirety due to appellee's large outstanding debt to the Medicare Trust Fund.
Appellee brought an adversary proceeding against appellant on December 17, 1984, seeking to enjoin appellant from recouping alleged pre-petition debt from future Medicare payments. Appellee claimed he would be forced to close the hospital immediately unless the recoupment rate was reduced. In an effort to ease appellee's extreme financial crisis, appellant agreed to reduce the recoupment rate from the PIP payments and the annual Volume Adjustment. A stipulation signed by the parties on December 21, 1984, was so ordered by Judge Edward J. Ryan of the United States Bankruptcy Court. It was subsequently amended in April and May of 1985.[3] It is the interpretation of this stipulation that is at issue in this appeal.
Specifically three paragraphs are significant to the appeal:
¶ 1 Pursuant to § 365 of [collectively Carl H. Neuman, d/b/a Lydia E. Hall Hospital, Syosset Hospital and Long Island Food Company are the "DIP"] the Bankruptcy Code, Neuman and the DIP hereby respectively reaffirms [sic] and assumes the Agreement, with all of its preexisting terms and provisions, except as modified by the provisions of this stipulation and order.
¶ 5 The DIP shall report to HCFA by telephone . . . HCFA may revise the amount of subsequent PIP payments to be made to the DIP on the basis of any fluctuations in patient census reflected in the aforementioned reports. Absent any closing prior to January 1, 1985, the Hospital is entitled to receive a volume adjustment for the year ended December 31, 1984. (The "Volume Adjustment") HCFA is hereby authorized to make an immediate Recoupment of up to $250,000 from the Volume Adjustment. Any balance from the Volume Adjustment after Recoupment shall be paid to the Hospital forthwith.
¶ 6 If, after the Filing Date, HCFA determines that overpayments have been made to the Hospital after the Filing Date, the DIP shall repay such overpayments in full within thirty (30) days of receipt of written notification . . . Such overpayments may be determined on the basis of the Hospital census data reported in accordance with paragraph "5". It is expressly agreed that the notification provided for in this paragraph shall be the only notification of such overpayments which will be required of HCFA.
When the stipulation was signed, the parties believed the 1984 Volume Adjustment, referred to in paragraph 5, would be approximately $450,000. It was understood that appellee would receive about $200,000 after appellant recouped the amount it advanced *705 in the form of deferrals under paragraph 5 of the agreement. The parties failed, however, to include the approximated figures in the body of the stipulation or in the amendments. Subsequently it was learned that the $450,000 was a gross underestimation of the 1984 Volume Adjustment, which was later calculated to be $2.1 million.
No post-petition debt existed at the time the parties entered into the stipulation. Currently, however, it is uncontested that appellee owes in excess of one million dollars in post-petition Medicare overpayments received during the period since December 11, 1984. Appellee owes an even larger pre-petition debt.
In June, 1985, appellant moved in the United States Bankruptcy Court, pursuant to Rule 60(b), F.R.Civ.P., to modify paragraph 5 of the stipulation, which permitted appellee to retain the balance of the 1984 Volume Adjustment after specified recoupments.
Bankruptcy Judge Abram found unilateral mistake on the part of appellant sufficient to modify the stipulation but no fraudulent or intentional misconduct on the part of the appellee, which she considered essential to warrant vacating the stipulation. Judge Abram granted partial relief on the grounds that appellant knew before entering into the final amendment to the stipulation that the 1984 Volume Adjustment was estimated to be one million dollars, not $450,000. Since appellant had the opportunity but did not alter paragraph 5 after learning of the two-fold increase in the estimated adjustment figures, she concluded that appellee was entitled to the balance of the one million dollars after the recoupments authorized pursuant to the amended stipulation. She left open the issue regarding the disbursement of the remaining Volume Adjustment funds.
Discussion
Appellant contends that Judge Abram's interpretation and modification of paragraph 5 failed to consider and, in effect, nullified paragraphs 1 and 6 of the stipulation. The court agrees. Judge Abram erred as a matter of law in failing to apply generally accepted standards of contract interpretation to the stipulation at issue.
A stipulation is a contract between parties. It is subject to the general principals governing the construction of a contract. Yonkers Fur Dressing Co., Inc. v. Royal Insurance Co., 247 N.Y. 435, 446, 160 N.E. 778 (1928); Nishman v. DeMarco, 76 App.Div.2d 360, 366, 430 N.Y.S.2d 339, 344 (2d Dep't. 1981), appeal dismissed, 53 N.Y.2d 642, 438 N.Y.S.2d 787, 420 N.E.2d 979 (1981).
The stipulation should be interpreted within the four corners of the document. United States v. Armour & Co., 402 U.S. 673, 682, 91 S.Ct. 1752, 1757, 29 L.Ed.2d 256 (1971). The preferred interpretation gives effect to every part of the contract. Bloor v. Falstaff Brewing Corp., 454 F.Supp. 258, 265 (S.D.N.Y.1978) (Brieant, J.), aff'd, 601 F.2d 609 (2d Cir.1979); Weiss v. Weiss, 52 N.Y.2d 170, 174, 436 N.Y.S.2d 862, 864, 418 N.E.2d 377, 379 (1981). In particular, the purpose of the parties in making the contract must be evaluated, Schulman Investment Co. v. Olin Corp., 477 F.Supp. 623, 628 (S.D.N.Y.1979) (Tenney, J.), and no provision should be construed out of context and in isolation. Tougher Heating & Plumbing Co., Inc. v. State of New York, 73 App.Div.2d 732, 733, 423 N.Y.S.2d 289, 291 (3rd Dep't 1979). Furthermore, if a construction can give effect to all provisions of the contract, an alternative construction which neutralizes any provision of that contract should be avoided. Rothenberg v. Lincoln Farm Camp, Inc., 755 F.2d 1017, 1019 (2d Cir. 1985).
The Bankruptcy Court's August 6th decision and subsequent orders mandating disbursement of $406,800 in the face of an uncontested, outstanding post-petition debt of at least one million dollars, ignores the Medicare statutory requirements incorporated into the stipulation in paragraph 1 and appellee's agreement to repay post-petition overpayments within thirty days of notification included in paragraph 6. *706 Judge Abram's modification of paragraph 5, without consideration of the agreement in its entirety and without regard to the purpose of the stipulation, violates the basic tenets of contract interpretation.
In paragraph 1 of the stipulation appellee reaffirmed the provider agreement that incorporates by reference the statutes and regulations governing the Medicare Program. The provider agreement is a mutual obligation. Blue Cross of Western Pa. v. Monsour Medical Center, 11 B.R. 1014, 1018, 7 B.C.D. 1141, 1144 (W.D.Pa. 1981). A party that receives benefits under such an agreement must also bear the burdens or obligations that it imposes. In re Shoppers Paradise, Inc., 8 B.R. 271, 7 B.C.D. 69 (Bankr.S.D.N.Y.1980); In re Yonkers Hamilton Sanitarium, Inc., 34 B.R. 385 (S.D.N.Y.1983) (Sand, J.). Furthermore, the government's common law right to recoup Medicare overpayments from funds otherwise due to a provider is codified in the Medicare statute. Mount Sinai Hospital v. Weinberger, 517 F.2d 329 (5th Cir.), modified, 522 F.2d 179 (5th Cir.1975), cert. denied, 425 U.S. 935, 96 S.Ct. 1665, 48 L.Ed.2d 176 (1976); 42 U.S.C. § 1359g.
Provisions establishing the procedures for payment and recoupment of overpayments to Medicare providers suggest a dual intent: to assist providers in the early reimbursement of their expenditures while at the same time ensuring that the government recoups overpayments at the earliest time possible. 42 U.S.C. § 1359g; 42 C.F.R. § 405.454 (Payments to providers). Overpayments are an unavoidable side effect of expedited reimbursements and delays in billing and accounting systems. They are not, however, intended to be a government bailout for financially ailing hospitals. The statutory framework provides explicit procedures for recovering such payments.
42 U.S.C. § 1395g directs that:
The Secretary shall periodically determine the amount which should be paid under this part to each provider of services with respect to the services furnished by it, and the provider of services shall be paid, at such time or times as the Secretary believes appropriate (but not less often than monthly) . . . with necessary adjustments on account of previously made overpayments.
The Medicare regulations also address the bankrupt or insolvent provider, requiring that:
any payments to [such] provider shall be adjusted by the intermediary, notwithstanding any other regulation or program instruction regarding the timing or manner of such adjustments, to a level necessary to insure that no overpayment to the provider is made.
42 C.F.R. § 405.454(k).
Post-petition overpayments are specifically addressed in paragraph 6 of the stipulation, in which appellee agreed to repay all such overpayments within thirty days of notification. Appellee was notified on June 20 and July 29, 1985, of overpayments in the amounts of $693,100 and $969,100, respectively. These post-petition debts exceed the $406,000 at issue in this appeal.
The court agrees with Judge Abram that the parties could have easily contracted with respect to the precise portion of the 1984 Volume Adjustment to be remitted to appellee. Instead, however, the language agreed to in paragraph 5 is open to interpretation. When the language of a contract is susceptible to more than one interpretation, the court may look to surrounding acts and circumstances. Record v. Royal Globe Ins. Co., 83 App.Div.2d 154, 158, 443 N.Y.S.2d 755, 757 (2d Dep't.1981).
A review of the circumstances surrounding the agreement illustrates the flaw in the Bankruptcy Court's decision. Appellant agreed to the stipulation in an attempt to ease appellee's financial constraints. In the absence of such consideration appellant would have continued to collect $50,000 biweekly from appelle's PIP payments and would have retained the 1984 Volume Adjustment in its entirety. See Appendix Vol. 3, 1102, August 6, 1985 hearing. The purpose of the agreement was to reduce the *707 rate at which appellant was to recoup the Medicare Trust Fund overpayments, not to forgive the overpayments. It is clear that if appellant had known the actual Volume Adjustment, it would not have consented to paragraph 5 of the stipulation.
The obligation to repay any post-petition debt within thirty days of notification and the reaffirmation of the provider agreement are as much a part of the bargain as the adjustment of the recoupment rates and the allocation of the balance of the 1984 Volume Adjustment. No logical reading of the stipulation nor consideration of appellee's staggering debt and inability to repay that debt could suggest that the parties bargained for the sum of money that the Bankruptcy Court has ordered appellant to disburse.
Appellant also contends that the Bankruptcy Court's orders require unlawful payments in contravention of federal law. The court need not reach the question of the limits of HCFA's authority, as it is clear that appellee accepted the established procedures for recouping Medicare overpayments and specifically agreed to repay any post-petition overpayments by assenting to paragraphs 1 and 6 of the stipulation.
Construing the stipulation as whole, the court finds that Judge Abram erred in mandating the government to disburse additional Medicare Trust Funds when such funds should have gone toward the liquidation of appellee's post-petition debt. The August 8, 21, and 23 orders are reversed and appellee is entitled to no further payments until it has satisfied the post-petition debt owed to appellant.
IT IS SO ORDERED.
NOTES
[1] Blue Cross/Blue Shield of Greater New York is the nominal defendant/appellant in this proceeding. HCFA, however, is the real party in interest. Blue Cross acts as HCFA's fiscal intermediary under the Medicare Program.
[2] Although the amount is disputed, HCFA has filed a claim against the hospital for $6,796,377 in pre-petition overpayments.
[3] Two amendments to the stipulation, dated April 26, 1985 and May 14, 1985, postponed resumption of recoupment at the level of $50,000, from April until July, 1985, therefore, increasing the amount of deferred recoupment from the 1984 Volume Adjustment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543416/ | 997 A.2d 144 (2010)
414 Md. 708
Dameek YEARBY a/k/a Dameek Yerby
v.
STATE of Maryland.
No. 119, September Term, 2009.
Court of Appeals of Maryland.
June 17, 2010.
*145 Kellie M. Black, Asst. Public Defender (Paul B. DeWolfe, Public Defender, of Baltimore, MD), on brief, for petitioner.
Diane E. Keller, Asst. Atty. Gen. (Douglas F. Gansler, Atty. Gen. of Maryland, of Baltimore, MD), on brief, for respondent.
Argued before BELL, C.J., HARRELL, BATTAGLIA, GREENE, MURPHY, ADKINS and BARBERA, JJ.
BATTAGLIA, J.
The Petitioner, Dameek Yearby,[1] was convicted of robbery, second degree assault, and theft of goods with a value less than $500, in a jury trial in the Circuit Court for Baltimore City. After his motion for new trial was denied, and sentence imposed, he appealed to the Court of Special Appeals. In an unreported opinion, the intermediate appellate court affirmed the judgments in all respects.
Yearby then filed a petition for certiorari in this Court. We granted his petition to consider the following question:
*146 Did the State commit a Brady[2] violation by failing to disclose the facts that the police had developed other suspects with respect to a series of robberies that happened in the same area and during the same time frame as the robbery of which Petitioner was accused, and that at least one of those suspects resembled Petitioner?
Yearby v. State, 411 Md. 355, 983 A.2d 431 (2009). We shall answer "No" to the question, and consequently, shall affirm.
FACTS AND PROCEDURAL HISTORY
On the night of November 8, 2004, Camille Zongo, a student at Morgan State University in Baltimore, was robbed at gunpoint on campus. After surrendering money to the robber, she began walking toward her dormitory. The gunman ordered her to turn around and walk in the opposite direction. As she turned around toward him, Ms. Zongo could see her assailant because the area was well-lit.[3] She later described him as a black male, with a "low haircut" and a caramel complexion, about 5'7" to 5'8" tall, and wearing a white shirt.
In late 2004, there had been a series of other armed robberies in and around the Morgan State campusat least fourteen had been reported to police. Detective James B. Harrison of the Morgan State University Police Department was assigned the duty to investigate; in the course of his investigation, Yearby, who also was a student at Morgan State, filed a complaint with campus police claiming he had been assaulted. Harrison's suspicions heightened when, shortly afterward, Yearby's roommate, Daryl Gates, was the victim of a more serious assault. There were rumors about campus that Yearby and Gates had been responsible for the robbery spree and that those suspicions had fueled the assaults against Yearby and Gates.
Detective Harrison came to suspect Yearby in the robbery against Ms. Zongo and decided to prepare a photo array that included Yearby's college photo ID. Ms. Zongo selected Yearby's photo from the array, telling Harrison she was "positive" he was the robber. After obtaining an arrest warrant, Detective Harrison, while interviewing Yearby, ostensibly concerning the assault against him, instead, arrested Yearby.
Yearby was charged with robbery with a dangerous weapon; robbery; first degree assault; second degree assault; theft of goods with value less than $500; wearing, carrying, or transporting a handgun; and use of a handgun during the commission of a felony or crime of violence.[4]
Yearby filed a motion to suppress Ms. Zongo's pretrial identification. Detective Harrison testified at the hearing on that *147 motion, setting forth the background surrounding the case, and the reasons his investigation focused on Yearby as the perpetrator of the armed robbery. Defense counsel questioned him about whether there were other suspects in the case:
[DEFENSE COUNSEL]: Now, thesewhen you put together this photo array, did you ever consult with Baltimore City Police Department for possible persons of interest?
[DETECTIVE HARRISON]: Yes.
[DEFENSE COUNSEL]: And did you come up with any information from Baltimore City as to possible suspects?
[DETECTIVE HARRISON]: No.
[DEFENSE COUNSEL]: No?
[DETECTIVE HARRISON]: No. Not at that time.
[DEFENSE COUNSEL]: And did you have other possible suspects during the investigation before you did the photo array?
[DETECTIVE HARRISON]: Like I said, there wasthere wasI believe they had within that time, during that time, they've had, like, fourteen armed robberies at that time, so it was just
[DEFENSE COUNSEL]: My question is, did you have other suspects?
[DETECTIVE HARRISON]: Yes, I did.
[DEFENSE COUNSEL]: And did you put any of those other suspects in the photo array?
[DETECTIVE HARRISON]: Yes, I did.
[DEFENSE COUNSEL]: Okay. And can you identify which of these photos were the other suspects?
[DETECTIVE HARRISON]: Not at that time, there wasn't.
[DEFENSE COUNSEL]: I'm sorry?
[DETECTIVE HARRISON]: I didn't put any of them in that photo array.
[DEFENSE COUNSEL]: Well, what photo array did you put them in?
[DETECTIVE HARRISON]: Another photo array [that I did not show to Ms. Zongo].
* * *
[DETECTIVE HARRISON]: Okay. What happened was, there were fourteen armed robberies in the area at that time. So quite naturally I have a number of different suspects, but what I did is, they were subsequently identified by other students and I did put a photo array involving Mr. Yearby's picture. The one that I showed her, since it did state that he was a light-skinned male, I showed her his picture and that [was] the only photo array that I showed her.
The court denied Yearby's motion to suppress, and Ms. Zongo's pretrial identification subsequently was admitted at trial.
Voir dire and jury selection took place the following day, and trial began on May 9, 2007. Ms. Zongo testified that Yearby was her assailant, and later authenticated her extrajudicial identification in front of the jury. Detective Harrison also testified, corroborating Ms. Zongo's testimony.
During re-cross examination of Harrison, the defense pressed him about "the other suspects that [he] developed not matching ... Yearby's description." Counsel then asked whether Harrison had provided any of his reports concerning the other robberies that had been under investigation at the same time he was investigating this case. Harrison answered "No," and when defense counsel persisted in this line of questioning, the prosecutor objected. A bench conference then ensued:
[PROSECUTOR]: [The defense] does have some of that information. (Inaudible) *148 second case, has the information. Defense has it.
[DEFENSE COUNSEL]: (Inaudible) fourteen armed robberies.
THE COURT: I didn't hear you.
[DEFENSE COUNSEL]: There's fourteen armed robberies. He hasn't said how many other people there are. I have no idea.
[PROSECUTOR]: And [defense counsel] did her own investigation and put another suspect, who was also one of those suspects, and showed it
[DEFENSE COUNSEL]: And looks just like my guy. If she wants to go down that road, we can do it.
* * *
THE COURT: Let's just end it here...
(Emphasis added.)
The jury convicted Yearby of robbery, second degree assault, and theft of goods with value less than $500, and acquitted him of the remaining charges.
Yearby filed a timely motion for new trial, asserting that the State had violated Brady by failing to disclose that Detective Harrison "had developed additional suspects at the time he administered the photographic line-up to Ms. Zongo," that the prosecutor's closing argument had been "loaded with improper remarks," that the trial court erroneously had denied a defense motion for mistrial and further had refused to give a curative instruction to correct repeated attempts by the prosecutor to introduce hearsay, and that the evidence was insufficient. After a hearing, the court denied Yearby's motion. Yearby was sentenced to six years' imprisonment, suspended to time already served, with three years' probation.
Yearby appealed to the Court of Special Appeals, claiming that the trial court had erred in denying his motion for new trial because the State had violated Brady. He also contended in the intermediate appellate court that the trial judge had committed plain error by failing to take any curative action in response to the prosecutor's "multiple improper comments" during closing argument.
The intermediate appellate court affirmed the judgments of the trial court in an unreported opinion. Yearby filed a petition for certiorari, limited to the Brady issue, which we granted.
INTRODUCTION
The Supreme Court held in Brady v. Maryland, 373 U.S. 83, 87, 83 S.Ct. 1194, 1196-97, 10 L.Ed.2d 215, 218 (1963), that "the suppression by the prosecution of evidence favorable to an accused upon request violates due process where the evidence is material either to guilt or to punishment, irrespective of the good faith or bad faith of the prosecution." The Court subsequently has refined and elaborated on this holding, extending the categories of evidence that must be disclosed, Giglio v. United States, 405 U.S. 150, 154, 92 S.Ct. 763, 766, 31 L.Ed.2d 104, 108 (1972) (impeachment evidence), and, when evidence is "highly probative of innocence," relieving the accused of the burden of making a request. United States v. Agurs, 427 U.S. 97, 110, 96 S.Ct. 2392, 2400, 49 L.Ed.2d 342, 353 (1976); Wilson v. State, 363 Md. 333, 346, 768 A.2d 675, 682 (2001); see also Diallo v. State, 413 Md. 678, 706-08, 994 A.2d 820, 837-38 (2010) (discussing a prosecutor's duty to discover and disclose exculpatory evidence known to other state actors).
There are, however, limits to the prosecutor's automatic duty of disclosure. See United States v. Bagley, 473 U.S. 667, 675 n. 7, 105 S.Ct. 3375, 3380 n. 7, 87 L.Ed.2d 481, 489 n. 7 (1985) ("An interpretation of Brady to create a broad, constitutionally *149 required right of discovery `would entirely alter the character and balance of our present systems of criminal justice.'") (quoting Giles v. Maryland, 386 U.S. 66, 117, 87 S.Ct. 793, 819, 17 L.Ed.2d 737, 769 (1967)) (Harlan, J., dissenting). As the Supreme Court has explained, "a rule that the prosecutor commits error by any failure to disclose evidence favorable to the accused, no matter how insignificant, would impose an impossible burden on the prosecutor and would undermine the interest in the finality of judgments." Bagley, 473 U.S. at 675 n. 7, 105 S.Ct. at 3380 n. 7, 87 L.Ed.2d at 489 n. 7.
The results of these refinements can be distilled into the following formulation:
There are three components of a true Brady violation: The evidence at issue must be favorable to the accused, either because it is exculpatory, or because it is impeaching; that evidence must have been suppressed by the State, either willfully or inadvertently; and prejudice must have ensued.
Strickler v. Greene, 527 U.S. 263, 281-82, 119 S.Ct. 1936, 1948, 144 L.Ed.2d 286, 302 (1999); see also Harris v. State, 407 Md. 503, 521, 966 A.2d 925, 935 (2009) (noting that, in the context of a Brady claim, evidence "favorable to the defense" includes mitigation evidence); accord State v. Williams, 392 Md. 194, 199, 896 A.2d 973, 975-76 (2006); Ware v. State, 348 Md. 19, 38, 702 A.2d 699, 708 (1997).
The prejudice prong is closely related to the question of materiality. Banks v. Dretke, 540 U.S. 668, 698-99, 124 S.Ct. 1256, 1276, 157 L.Ed.2d 1166, 1194-95 (2004). The standard is whether there is a "reasonable probability" that disclosure of the suppressed evidence would have led to a different result.[5]Kyles v. Whitley, 514 U.S. 419, 434, 115 S.Ct. 1555, 1566, 131 L.Ed.2d 490, 506 (1995) (emphasis added). "A `reasonable probability' of a different result is ... shown when the government's evidentiary suppression `undermines confidence in the outcome of the trial.'" Id., quoting Bagley, 473 U.S. at 678, 105 S.Ct. at 3381, 87 L.Ed.2d at 491. Accord Strickler, 527 U.S. at 281, 119 S.Ct. at 1948, 144 L.Ed.2d at 302 ("[S]trictly speaking, there is never a real `Brady violation' unless the nondisclosure was so serious that there is a reasonable probability that the suppressed evidence would have produced a different verdict.").
The Supreme Court has further explicated the materiality standard, explaining that it is essentially the same test as set forth in Strickland v. Washington, 466 U.S. 668, 104 S.Ct. 2052, 80 L.Ed.2d 674 (1984), in determining whether a defendant has been prejudiced by a constitutional *150 violation affecting his right to a fair trial.[6]Bagley, 473 U.S. at 682, 105 S.Ct. at 3383, 87 L.Ed.2d at 494 (Blackmun, J., plurality). See also 6 Wayne R. LaFave, et al., Criminal Procedure § 24.3(b), at 350-53 (3d ed. 2007). Our own cases have said that evidence is material if there is a "substantial possibility that, had the [evidence] been revealed to [defense] counsel, the result of his trial would have been any different."[7]State v. Thomas, 325 Md. 160, 190, 599 A.2d 1171, 1185 (1992) (emphasis added) (footnote omitted); Bowers v. State, 320 Md. 416, 426-27, 578 A.2d 734, 738-39 (1990). Accord Grandison v. State, 390 Md. 412, 432 n. 4, 889 A.2d 366, 377 n. 4 (2005).
An alleged Brady violation is a constitutional claim, based on the Due Process Clauses of the Fifth and Fourteenth Amendments. Agurs, 427 U.S. at 107, 96 S.Ct. at 2399, 49 L.Ed.2d at 352 ("We are not considering the scope of discovery authorized by the Federal Rules of Criminal Procedure, or the wisdom of amending those Rules.... We are dealing with the defendant's right to a fair trial mandated *151 by the Due Process Clause of the Fifth [and Fourteenth] Amendment[s] to the Constitution."); id. at 110, 96 S.Ct. at 2400, 49 L.Ed.2d at 353 (discussing the determination of "`materiality' in the constitutional sense" and delineating "the constitutional obligation" of the prosecutor); Brady, 373 U.S. at 87, 83 S.Ct. at 1196-97, 10 L.Ed.2d at 218 ("the suppression by the prosecution of evidence favorable to an accused upon request violates due process") (emphasis added); Harris, 407 Md. at 521, 966 A.2d at 935; 6 LaFave, § 24.3(a), at 339-43 (explaining that Brady claims have been analyzed under due process rather than as violations of the Confrontation Clause). Brady disclosure thus is fundamentally distinct from discovery rules, which further spell out the State's (and to a lesser extent, the defendant's) obligations to disclose information prior to trial, but are not grounded in either the Federal or State Constitution.[8]
It bears repeating that the burdens of production and persuasion regarding a Brady violation fall on the defendant. Diallo, 413 Md. at 704, 994 A.2d at 835 ("To establish a Brady violation, Petitioner must establish ...") (emphasis added); accord Harris, 407 Md. at 521, 966 A.2d at 935; Grandison, 390 Md. at 431, 889 A.2d at 377; Ware, 348 Md. at 38, 702 A.2d at 708.
DISCUSSION
Yearby asserts that the State was obligated under Brady "to disclose the fact that the police had developed other suspects." According to Yearby, his own investigation revealed that "there was another male who is similar in appearance" to him who was "caught red handed in the act of robbing people" with Yearby's co-defendant in another robbery case, which ultimately was stetted. He insists that the State was required to disclose information he requested,[9] concerning these "other *152 suspects" in other robberies, apparently under the theory that the same perpetrator in at least some of the other robberies may also have committed the robbery of Ms. Zongo.
Yearby contends that he has satisfied all three prongs of the Brady analysis: that the prosecutor withheld evidence, which in turn was favorable to him, and that the withheld evidence was material. Consequently, he maintains that the State's "refus[al]" to disclose the requested information denied him due process of law, that the trial court erred in denying his motion for new trial, and that the Court of Special Appeals erred in affirming the trial court.
The State counters that Yearby failed to satisfy any of the Brady requirements, and that we must therefore affirm the judgment. According to the State, the information it allegedly failed to disclose did not fall within the scope of its Brady obligation, and that, in any event, the information was irrelevant to this case and therefore was immaterial. The State further argues that "the information Yearby claims was withheld was actually known to the defense during trial, if not before, or readily accessible to [him] through reasonable investigation." We agree with the State as to the latter argument, and therefore do not reach the issues of materiality, or whether the disputed evidence was exculpatory to Yearby.
Whether the Prosecution Withheld Evidence
Prosecutorial suppression of evidence is a predicate to a Brady claim. Indeed, as the intermediate appellate court explained in its unreported opinion in the present case, "[w]ith regard to suppression of evidence, Brady deals with the issue of withholding the knowledge from the jury, right through to the close of trial." See, e.g., Agurs, 427 U.S. at 103, 96 S.Ct. at 2397, 49 L.Ed.2d at 349 ("The rule of Brady ... arguably applies in three quite different situations. Each involves the discovery, after trial, of information which had been known to the prosecution but unknown to the defense.") (emphasis added); Conyers v. State, 367 Md. 571, 601, 790 A.2d 15, 33 (2002) (explaining that evidence is "suppressed within the meaning of Brady if it is `information which had been known to the prosecution but unknown to the defense'"), quoting Spicer v. Roxbury Corr. Inst., 194 F.3d 547, 557 (4th Cir.1999) (internal quotation omitted). Thus, suppression is inextricably intertwined with the timing of disclosure[10] and *153 the defendant's independent duty to investigate, especially in a situation where the defense "was aware of the potentially exculpatory nature of the evidence as well as its existence." 6 LaFave, § 24.3(b), at 362.
We previously have explained that, under Brady and its progeny, the defense is not relieved of its "obligation to investigate the case and prepare for trial." Ware, 348 Md. at 39, 702 A.2d at 708. See Bagley, 473 U.S. at 675, 105 S.Ct. at 3379-80, 87 L.Ed.2d at 489 (noting that Brady's "purpose is not to displace the adversary system as the primary means by which truth is uncovered, ... [and] [t]hus, the prosecutor is not required to deliver his entire file to defense counsel[.]"). Moreover, "[t]he prosecution cannot be said to have suppressed evidence for Brady purposes when the information allegedly suppressed was available to the defendant through reasonable and diligent investigation." Ware, 348 Md. at 39, 702 A.2d at 708. Finally, Brady "offers a defendant no relief when the defendant knew or should have known facts permitting him or her to take advantage of the evidence in question or when a reasonable defendant would have found the evidence." Id. (emphasis added). See, e.g., Hoke v. Netherland, 92 F.3d 1350, 1355-56 (4th Cir.1996) (holding that defendant's Brady claim failed because his counsel had failed to undertake a "reasonable and diligent" investigation which probably would have revealed the allegedly government-suppressed information); United States v. Wilson, 901 F.2d 378, 380 (4th Cir.1990) (noting that "`the Brady rule does not apply if the evidence in question is available to the defendant from other sources.'") (quoting United States v. Davis, 787 F.2d 1501, 1505 (11th Cir. 1986)); cf. McCleskey v. Zant, 499 U.S. 467, 498, 111 S.Ct. 1454, 1472, 113 L.Ed.2d 517, 547 (1991) (noting, in a federal habeas action, that a "petitioner must conduct a reasonable and diligent investigation aimed at including all relevant claims and grounds for relief ... [and if] what petitioner knows or could discover upon reasonable investigation supports a claim for relief ..., what he does not know is irrelevant."); United States v. Payne, 63 F.3d 1200, 1208 (2d Cir.1995) ("Documents that are part of public records are not deemed suppressed if defense counsel should know of them and fails to obtain them because of lack of diligence in his own investigation.").
If the defendant has actual or constructive knowledge of the allegedly withheld exculpatory information, there cannot be a Brady violation. "[T]he necessary inquiry is whether the defendant knew or should have known facts that would have allowed him to access the undisclosed evidence." Ware, 348 Md. at 39, 702 A.2d at 709. The defendant's constructive knowledge is assessed under a reasonable person standard. Id. (noting that State is not relieved of its Brady obligation "unless a reasonable defendant would have looked to that public record in the exercise of due diligence").
We also recently have explained that "[n]either the prosecutor's negligence, willfulness, [n]or lack of bad faith in failing to produce exculpatory or impeachment information bears on our consideration of whether the defendant's right to due process was violated under Brady." Diallo v. State, 413 Md. at 705, 994 A.2d at 836. In Diallo, we addressed a Brady claim by the son of a United Nations official. The petitioner *154 in Diallo asserted that the U.S. State Department, an alleged "agent" of the prosecutor in Maryland, "had actual knowledge that [Diallo] was entitled to diplomatic immunity and that it chose not to convey this information to the prosecutor." Id. at 704, 994 A.2d at 835. In determining there had been no Brady violation, we explained that all the evidence allegedly suppressed either "was known to [Diallo] or he was in a unique position to obtain." Id. at 706, 994 A.2d at 836.
Applying these principles to the instant case, we hold that "[t]he rule of Brady" is inapplicable. Defense counsel cross-examined Detective Harrison about other possible suspects, both during the pre-trial suppression hearing and at trial. From the suppression hearing transcript, we can glean that Yearby knew, prior to trial, that Detective Harrison had been investigating fourteen robberies that had taken place in late 2004 in or near the Morgan State campus, and that he had "a number of different suspects." From the trial transcript, in particular the bench conference that took place during re-cross examination of Detective Harrison, it is clear that Yearby further knew of at least one alleged suspect who "look[ed] just like" him. Later, during the hearing on the motion for new trial, Yearby admitted that "during and after trial," he found out "on [his] own" that Detective Harrison "was aware one or two days before he ever showed these photo arrays to Ms. Zongo, that there was another male who is similar in appearance to ... Yearby who was caught red handed in the act robbing people with [Campbell]." From this premise, Yearby speculated that Detective Harrison "had to be" considering this other, unnamed suspect in the robbery of Ms. Zongo. Detective Harrison testified, however, that Yearby was the only suspect he ever considered in this case.
Yearby had information before, during, and after trial regarding the other suspects identified in connection with the series of robberies at Morgan State in 2004 and was able to cross-examine Detective Harrison, the lead investigator, about whether there could be or were other subjects. He further knew of at least one other subject who "look[ed] just like" him. As in Diallo, "`[t]here can be no Brady violation where there is no suppression of evidence.'" 413 Md. at 706, 994 A.2d at 836, quoting Diallo v. State, 186 Md.App. 22, 73-74, 972 A.2d 917, 947 (2009).
Although this case is unlike Diallo in that the petitioner there was "in a unique position to obtain" at least some of the alleged Brady material, here Yearby also knew of the allegedly suppressed material. We hold that there was no Brady violation in the present case.
JUDGMENT OF THE COURT OF SPECIAL APPEALS AFFIRMED. COSTS IN THIS COURT AND IN THE COURT OF SPECIAL APPEALS TO BE PAID BY THE PETITIONER.
NOTES
[1] The Petitioner's surname has at least two spellings in the record, but for the remainder of this opinion, we shall adopt the spelling "Yearby," as he does in his brief.
[2] Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963). The reference to Brady concerns "[i]nformation or evidence that is favorable to a criminal defendant's case and that the prosecution has a duty to disclose." Black's Law Dictionary 212 (9th ed. 2009).
[3] In fact, Ms. Zongo's uncontroverted testimony was that she "could pretty much make out what this individual looked like because it was a light right on top of us."
[4] Around the same time, Yearby was charged, in two different cases, with armed robbery and related charges involving separate crimes that occurred on November 16, 2004, against a different victim. The latter charges were stetted. Yearby also contends, in support of his Brady violation assertion, that the co-defendant in those cases, Michael Campbell, had been implicated, along with another subject who "look[ed] just like" Yearby, in yet another robbery that took place around the same time, that did not involve Yearby. The record is devoid of any information in support of this assertion, however.
[5] The Supreme Court has applied a different rule in cases where "the undisclosed evidence demonstrates that the prosecution's case includes perjured testimony and that the prosecution knew, or should have known, of the perjury." United States v. Agurs, 427 U.S. 97, 103, 96 S.Ct. 2392, 2397, 49 L.Ed.2d 342, 349 (1976). In such cases, the materiality standard is stricter (against the State). Id. at 104, 96 S.Ct. at 2397, 49 L.Ed.2d at 350; see also Giglio v. United States, 405 U.S. 150, 154, 92 S.Ct. 763, 766, 31 L.Ed.2d 104, 108 (1972) ("A new trial is required if `the false testimony could ... in any reasonable likelihood have affected the judgment of the jury ....'") (quoting Napue v. Illinois, 360 U.S. 264, 271, 79 S.Ct. 1173, 1178, 3 L.Ed.2d 1217, 1222 (1959)) (emphasis added). In Harris v. State, 407 Md. 503, 522, 966 A.2d 925, 936 (2009), we reaffirmed the existence of a different materiality standard in cases where "the facts demonstrate that the prosecution's case included perjured testimony and that the prosecution knew or should have known of the perjury." See also State v. Williams, 392 Md. 194, 203 n. 4, 229 n. 12, 896 A.2d 973, 978 n. 4, 993 n. 12 (2006); Grandison v. State, 390 Md. 412, 431, 889 A.2d 366, 377 (2005); Conyers v. State, 367 Md. 571, 598, 790 A.2d 15, 31 (2002).
[6] In Strickland, the constitutional right at issue was the Sixth Amendment right to the effective assistance of counsel. In that context, the Court explicitly tied prejudice to materiality, and cited Agurs, a case addressing materiality of Brady evidence. Strickland v. Washington, 466 U.S. 668, 694, 104 S.Ct. 2052, 2068, 80 L.Ed.2d 674, 698 (1984) ("Accordingly, the appropriate test for prejudice finds its roots in the test for materiality of exculpatory information not disclosed to the defense by the prosecution, United States v. Agurs, 427 U.S., at 104, 112-113 [96 S.Ct. 2392], and in the test for materiality of testimony made unavailable to the defense by Government deportation of a witness, United States v. Valenzuela-Bernal, [458 U.S. 858], at 872-874 [102 S.Ct. 3440, 73 L.Ed.2d 1193 (1982)].").
Consequently, to prevail on a Strickland claim, a "defendant must show that there is a reasonable probability that, but for counsel's unprofessional errors, the result of the proceeding would have been different." 466 U.S. at 694, 104 S.Ct. at 2068, 80 L.Ed.2d at 698. The Court defined "reasonable probability" as "a probability sufficient to undermine confidence in the outcome." Id. The "reasonable probability" standard is the same as that applied in Kyles v. Whitley, 514 U.S. 419, 434, 115 S.Ct. 1555, 1566, 131 L.Ed.2d 490, 506 (1995), and United States v. Bagley, 473 U.S. 667, 682, 105 S.Ct. 3375, 3383, 87 L.Ed.2d 481, 494 (1985) (Blackmun, J., plurality), cases involving the materiality of Brady evidence.
[7] In State v. Williams, 392 Md. at 203 n. 4, 229 n. 12, 896 A.2d at 978 n. 4, 993 n. 12, we used language suggesting that the correct standard in assessing Brady materiality was whether there was a "reasonable possibility" that, if the suppressed evidence had been disclosed, the verdict would have been different, citing Dorsey v. State, 276 Md. 638, 350 A.2d 665 (1976). Dorsey concerned the application of the harmless error standard of Chapman v. California, 386 U.S. 18, 24, 87 S.Ct. 824, 828, 17 L.Ed.2d 705, 710-11 (1967), in a criminal case. We thus applied a harmless error standard in Williams, because we analogized the facts of that case to Giglio v. United States, 405 U.S. 150, 92 S.Ct. 763, 31 L.Ed.2d 104, in which the Supreme Court applied the same standard.
In Williams, a State witness arguably had perjured himself, even though the prosecutor trying the case was unaware of the falsity of the testimony. 392 Md. at 199-201, 896 A.2d at 976-77. Thus, that case fell under the stricter rule of Giglio, Napue, and Mooney v. Holohan, 294 U.S. 103, 55 S.Ct. 340, 79 L.Ed. 791 (1935), rather than the general rule of "reasonable probability." See 6 Wayne R. LaFave, et al., Criminal Procedure § 24.3(b), at 350-53 (3d ed. 2007); id. § 24.3(d), at 376-81; see also 2 Nancy Hollander, et al., Wharton's Criminal Procedure § 12:41, at XX-XXX-XXX & n. 5 (14th ed. 2009).
Not surprisingly, Yearby in his brief latches onto the "reasonable possibility" language we used in Williams, but his reliance on that language is misplaced. The present case does not involve perjured testimony or the prosecution's failure to notify the court when it should have been aware of the presentation of false evidence, and, consequently, the strict materiality standard of Williams (i.e., the harmless error standard) does not apply.
[8] We note that, in Maryland, discovery in criminal trials is governed by Maryland Rule 4-263, but that the Rule's disclosure obligations, to the extent they exceed due process requirements, are not of a constitutional nature. Weatherford v. Bursey, 429 U.S. 545, 559, 97 S.Ct. 837, 846, 51 L.Ed.2d 30, 42 (1977). At the time of Yearby's trial, Rule 4-263(a)(1) (2007) required the State to disclose Brady material without a defense request ("Without the necessity of a request, the State's Attorney shall furnish to the defendant... [a]ny material or information tending to negate or mitigate the guilt or punishment of the defendant as to the offense charged[.]"), whereas disclosure of other information was predicated on a defense request, Rule 4-263(b), or was not subject to discovery by the defendant. Rule 4-263(c). Rule 4-263 thus governed (and in its present version, still governs) all disclosure of evidence by the State to a criminal defendant in the circuit courts, including that mandated by Brady, as well as that mandated only by rule.
[9] The extent of Yearby's requests is unclear. On March 4, 2005, more than two years before trial, he filed a Request for Discovery and Inspection, wishing "to obtain disclosure of material and information to the fullest extent authorized and directed by Maryland Rule 4-263." During the suppression hearing, and later during trial, he expressed apparent dissatisfaction with the State's disclosures, but never filed a motion to compel discovery.
In his motion for new trial, Yearby asserted that "Detective Harrison initially testified [at the suppression hearing] that he did not have any other suspects for this particular crime at the time he conducted the photo line-up," but "then changed his testimony and said he did have other suspects before the photo line-up was administered, but that he did not include photographs of any suspects" in the line-up shown to Ms. Zongo. According to Yearby, "the State never produced any material or information ... of any other possible suspects in this case." At trial, according to Yearby, Detective Harrison "testified that he had developed additional suspects for this crime" prior to administering the photo line-up, but that "he did not include any photographs of these suspects in the photo line-up shown to Ms. Zongo."
Detective Harrison's actual testimony at the suppression hearing was that the "other suspects" had been implicated in other crimes that had occurred in late 2004, but not in the robbery of Ms. Zongo. At trial, under re-direct examination, he testified that the other suspects did not match the description given by Ms. Zongo. We note that the trial transcript was not yet available when Yearby filed the motion for new trial.
During the hearing on the motion for new trial, Yearby proffered that "I did ask the State to still provide [information regarding the other suspects] after the trial was over." The record is devoid of any documents reflecting such a request.
[10] Although as a general rule, Brady issues crystalize after the conclusion of trial, and indeed, often in the context of collateral attacks on criminal verdicts, see, e.g., Harris v. State, 407 Md. 503, 506, 966 A.2d 925, 926-27 (2009) (post conviction proceeding); Williams, 392 Md. at 202, 896 A.2d at 977 (same); Grandison, 390 Md. 412, 889 A.2d 366 (fifth appeal from conviction); State v. Thomas, 325 Md. 160, 599 A.2d 1171 (1992) (post conviction proceeding); Bowers v. State, 320 Md. 416, 578 A.2d 734 (1990) (same), we hasten to add that this is not a hard-and-fast requirement. See, e.g., Diallo v. State, 413 Md. 678, 994 A.2d 820 (2010) (issue raised by pre-trial motion, and addressed in direct appeal); Ware v. State, 348 Md. 19, 702 A.2d 699 (1997) (direct appeal in capital case). Even in Ware, however, a case in which we determined there was a Brady violation, the defendant was unaware of the exculpatory evidence until two months after his conviction. Id. at 34, 702 A.2d at 706. The critical point is that the prosecutor's duty to disclose arises prior to trial, whereas the defendant's knowledge of a violation, should there be any, usually does not become clear until after the conclusion of trial. The timing of Brady disclosure is not an issue in the present case, however. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543618/ | 997 A.2d 1067 (2010)
414 N.J. Super. 152
William W. ALLEN and Vivian Allen, Plaintiffs-Appellants,
v.
V AND A BROTHERS, INC., d/b/a Caliper Farms Nursery and Landscaping Services, Defendants, and
Angelo DiMeglio, The Estate of Vincent DiMeglio, deceased; and Thomas Taylor, Individually, Defendants-Respondents.
DOCKET NO. A-6218-07T4.
Superior Court of New Jersey, Appellate Division.
Submitted February 24, 2010.
Decided June 23, 2010.
Katz & Dougherty, LLC, Mercerville, for appellants (George T. Dougherty, on the brief).
Maselli Warren, P.C., Princeton, for respondents (Paul J. Maselli and Peter B. Paris, on the brief).
Before Judges CUFF, PAYNE and WAUGH.
The opinion of the court was delivered by
*1068 PAYNE, J.A.D.
Suit was instituted by plaintiffs William W. Allen and Vivian Allen alleging, in the first count, breach of contract by defendant V and A Brothers, Inc., d/b/a/ Caliper Farms Nursery and Landscaping Services, as the result of its improper construction of a retaining wall and substitution of inferior backfill for that specified in the plans, resulting in the failure of the wall and substantial property damage. In the second count, plaintiff alleged violations of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -184, by V and A Brothers, its principals, Angelo DiMeglio and the Estate of Vincent Di Meglio,[1] and its employee, Thomas Taylor.
Thereafter, partial summary judgment was entered in plaintiffs' favor finding defendant V and A Brothers liable for failing to execute a written contract for the work in violation of N.J.A.C. 13:45A-16.2(a)(12), a regulation promulgated pursuant to the CFA. In an additional order of partial summary judgment, the claims against the individual defendants were dismissed. A jury trial then took place, resulting in a finding of liability on the part of V and A Brothers for breach of contract, and an award of damages on that claim in the amount of $100,000. Additionally, the jury awarded damages of $25,000 for the failure by V and A Brothers to execute a written contract in violation of N.J.A.C. 13:45A-16.2(a)(12). It awarded damages of $25,000 for the failure by V and A Brothers to obtain final approval of the project before accepting final payment from plaintiffs in violation of N.J.A.C. 13:45A-16.2(a)(10)(ii), and it awarded damages of $80,000 for the modification by V and A Brothers of the design of the retaining wall and substitution of inferior backfill material for that specified without the knowledge or consent of the plaintiffs in violation of N.J.A.C. 13:45A-16.2(a)(3)(iv). When the damages awarded pursuant to the CFA were trebled, the total amount of the award equaled $490,000. Attorneys' fees were also awarded.
Although plaintiffs prevailed on their claims against V and A Brothers, they have appealed from the dismissal of their CFA claims against the individual defendants, Angelo DiMeglio, the estate of Vincent DiMeglio and Thomas Taylor. We reverse and remand.
The Consumer Fraud Act provides, in N.J.S.A. 56:8-2, that:
The act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice; . . .
"Person" is defined in the preceding section to
include any natural person or his legal representative, partnership, corporation, company, trust, business entity or association, and any agent, employee, salesman, partner, officer, director, member, stockholder, associate, trustee or cestuis que trustent thereof.
[N.J.S.A. 56:8-1d.]
The Supreme Court set forth the history of the CFA in its decision in Cox v. Sears *1069 Roebuck & Co., 138 N.J. 2, 647 A.2d 454 (1994), stating:
In 1960, the Legislature passed the Consumer Fraud Act "to permit the Attorney General to combat the increasingly wide-spread practice of defrauding the consumer." Senate Committee, Statement to the Senate Bill No. 199 (1960). The Act conferred on the Attorney General the power to investigate consumer-fraud complaints and promulgate rules and regulations that have the force of law. N.J.S.A. 56:8-4. In 1971, the Legislature amended the Act to "give New Jersey one of the strongest consumer protection laws in the nation." Governor's Press Release for Assembly Bill No. 2402, at 1 (Apr. 19, 1971). The Legislature expanded the definition of "unlawful practice" to include "unconscionable commercial practices" and broadened the Attorney General's enforcement powers. Ibid. That amendment also provided for private causes of action, with an award of treble damages, attorneys' fees and costs. Ibid. Governor Cahill believed that those provisions would provide "easier access to the courts for the consumer, [would] increase the attractiveness of consumer actions to attorneys and [would] also help reduce the burdens on the Division of Consumer Affairs." Governor's Press Release for Assembly Bill No. 2402, at 2 (June 29, 1971).
[Id. at 14-15, 647 A.2d 454.]
The Court has directed that the CFA, as remedial legislation, be construed liberally in favor of consumers. Id. at 15, 647 A.2d 454 (citing Barry v. Arrow Pontiac, Inc., 100 N.J. 57, 69, 494 A.2d 804 (1985); Levin v. Lewis, 179 N.J.Super. 193, 200, 431 A.2d 157 (App.Div.1981); State v. Hudson Furniture Co., 165 N.J.Super. 516, 520, 398 A.2d 900 (App. Div.1979); and Martin v. American Appliance, 174 N.J.Super. 382, 384, 416 A.2d 933 (Law Div.1980)). "[T]he Act is designed to protect the public even when a merchant acts in good faith." Cox, supra, 138 N.J. at 16, 647 A.2d 454 (citing D'Ercole Sales, Inc. v. Fruehauf Corp., 206 N.J.Super. 11, 23, 501 A.2d 990 (App.Div. 1985)).
The Court in Cox explained that to violate the CFA, a "person" must commit an "unlawful practice" as defined in the legislation, and that an unlawful practice can consist of an affirmative act, a knowing omission or a regulatory violation. Id. at 17, 647 A.2d 454.
When the alleged consumer-fraud violation consists of an affirmative act, intent is not an essential element and the plaintiff need not prove that the defendant intended to commit an unlawful act. Chattin v. Cape May Greene, Inc., 124 N.J. 520, 522, 591 A.2d 943 (1991) (Stein, J. concurring). However, when the alleged consumer fraud consists of an omission, the plaintiff must show that the defendant acted with knowledge, and intent is an essential element of the fraud. Ibid.
* * *
The third category of unlawful acts consists of violations of specific regulations promulgated under the Act. In those instances, intent is not an element of the unlawful practice, and the regulations impose strict liability for such violations. Fenwick v. Kay Am. Jeep, Inc., 72 N.J. 372, 376, 371 A.2d 13 (1977). The parties subject to the regulations are assumed to be familiar with them, so that any violation of the regulations, regardless of intent or moral culpability, constitutes a violation of the Act.
[Id. at 17-19, 647 A.2d 454.]
In a series of decisions, courts have imposed liability upon individuals who were principals or employees of corporations sued for consumer fraud and who directly participated in the conduct giving rise to CFA liability. See Gennari v. Weichert *1070 Co. Realtors, 148 N.J. 582, 608-10, 691 A.2d 350 (1997) (imposing CFA liability on a builder and his wife, who was an officer in the builder's corporation and a Weichert realtor, for affirmative misrepresentation of the builder's experience and qualifications); New Mea Const. Corp. v. Harper, 203 N.J.Super. 486, 502, 497 A.2d 534 (App.Div.1985) (concluding that the CFA applies to a builder of a single-family home who uses substandard materials in violation of contract and directing the judge to assess damages against the builder's principal "if he finds from a review of the record and his findings that she meets the test for liability under the act."); Hyland v. Aquarian Age 2,000 Inc., 148 N.J.Super. 186, 193, 372 A.2d 370 (Ch.Div.1977) (in a case involving the offer of lifetime memberships in an entity providing discounts from merchants, none of which contracted for a period greater than ten years, remanding for a determination of the potential personal liability of the company's founder, observing that "[t]here is no suggestion that the statute was not intended to include natural persons who violate the act. More particularly, N.J.S.A. 56:8-1(d) includes natural persons within its definition of persons."); Kugler v. Koscot Interplanetary, Inc., 120 N.J.Super. 216, 251-58, 293 A.2d 682 (Ch.Div.1972) (imposing liability upon corporate principal who participated in a deceptive pyramid sale scheme to attract distributors for the corporation's cosmetic products).
In imposing liability for violation of the CFA on individuals or finding legal grounds for doing so, courts have not found it necessary to pierce the corporate veil in order to reach corporate principals and employees. Instead, they have interpreted the CFA, by its use of the term "person" in the liability provisions of N.J.S.A. 56:8-2 and the definition of "person" in N.J.S.A. 56:8-1(d), as providing sufficient statutory authority for the imposition of individual liability in circumstances in which the individual committed the unconscionable commercial practice or other prohibited act and an ascertainable loss resulted. See, e.g., New Mea, supra, 203 N.J.Super. at 502, 497 A.2d 534; Aquarian Age, supra, 148 N.J.Super. at 193, 372 A.2d 370.
We note that the conduct in the cases that we have cited was comprised of affirmative acts, rather than regulatory violations. We find no principled basis for distinguishing between the two for purposes of the imposition of individual liability.
We find it unnecessary to determine whether the tort participation theory, discussed at length by the Supreme Court in its decision in Saltiel v. GSI Consultants, Inc., 170 N.J. 297, 788 A.2d 268 (2002), provides an alternate ground for imposition of CFA liability on the individual defendants in this matter. In Saltiel, an architect sued a turfgrass corporation and its officers, claiming that the corporation had negligently prepared and designed turf specifications for an athletic field and that the officers were personally liable because they participated in the corporation's tort. On appeal, the sole issue was whether the trial court had erred in granting summary judgment to the corporate officers, Caton and Indyk. As framed by the Court, resolution of that issue required the Court to consider "(1) the proper application of the participation theory of personal liability for tortious conduct by corporate officers under New Jersey law; and (2) whether the plaintiff's claim against Indyk and Caton sounds in tort or contract." Id. at 302, 788 A.2d 268.
In discussing the participation theory, the Court noted that its "essence" is "that a corporate officer can be held personally liable for a tort committed by the corporation when he or she is sufficiently involved in the commission of the tort." Id. at 303, *1071 788 A.2d 268. It stated that "[a] predicate to liability is a finding that the corporation owed a duty of care to the victim, the duty was delegated to the officer and the officer breached the duty of care by his own conduct." Ibid. The Court also observed that the majority of the cases utilizing the participation theory had involved fraud and conversion. Id. at 304, 788 A.2d 268. However, it noted that "[a] number of jurisdictions, including New Jersey, also apply the participation theory to hold corporate officers personally liable for certain statutory violations." Id. at 305, 788 A.2d 268 (citing Koscot Interplanetary, supra, 120 N.J.Super. at 257, 293 A.2d 682).
Turning to the case before it, the Court noted that the conduct at issue was not intentional but, instead, allegedly negligent. Ibid. After discussing out-of-state precedent applying the participation theory to such conduct, the Court stated that "[w]hatever may be the appropriate standard for limiting corporate officers' liability under the participation theory, the essential predicate for application of the theory is the commission by the corporation of tortious conduct, participation in that tortious conduct by the corporate officer and resultant injury to the plaintiff." Id. at 309, 788 A.2d 268. However, if the breach of the corporation's duty was determined to be governed by contract law, the theory did not apply. Ibid. The Court then concluded that plaintiff had not pled or supported a cause of action sounding in tort, but only in contract. Id. at 315, 788 A.2d 268. It continued by observing that "[u]nder New Jersey law, a tort remedy does not arise from a contractual relationship unless the breaching party owes an independent duty imposed by law." Id. at 316, 788 A.2d 268 (citing New Mea, supra, 203 N.J.Super. at 493-94, 497 A.2d 534) (refusing to recognize a tort cause of action against the corporation's principal, while directing the judge to determine whether damages should be assessed against that person for violation of the CFA). Finding that the appeal involved a breach of contract, making the participation theory of individual liability inapplicable, the Court reversed our decision to the contrary and reinstated the order of summary judgment entered in favor of Caton and Indyk. Id. at 318, 788 A.2d 268.
We find it significant that the plaintiff in Saltiel did not allege a cause of action based upon a violation of the CFA. Thus, the matters at issue in that case differed significantly from those at issue here. Moreover, we do not read Saltiel as necessarily rejecting a tort theory of liability in a CFA case. In this regard, we note the Court's recognition that such a theory was used in a statutory, CFA context to impose liability on a defendant corporate director in Koscot Interplanetary. Saltiel, supra, 170 N.J. at 305, 788 A.2d 268. At very least, the Court left the issue of the applicability of the participation theory unresolved in circumstances in which a statute may provide the basis for tort liability. In the absence of any explicit statement to that effect, we reject any suggestion that the Saltiel Court's discussion of a participation theory of individual tort liability serves to restrict the scope of personal liability under the CFA. As a consequence, we find the dismissal of claims against the three individual defendants in this matter to have been erroneous.
In their briefs on appeal, plaintiffs argue that upon reversal of summary judgment, CFA liability on the part of the three individual defendants automatically adheres. We disagree. Liability can be imposed only upon proof of personal participation by an individual in a particular regulatory violation. We remand for a determination of such liability, noting that a jury has already determined the quantum *1072 of damages flowing from each of the regulatory violations.
Reversed and remanded.
NOTES
[1] Vincent DiMeglio died after the work at issue was completed but prior to trial in this matter. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543620/ | 11 F.2d 231 (1926)
BUCKEYE COTTON OIL CO.
v.
RAGLAND et al.
No. 4536.
Circuit Court of Appeals, Fifth Circuit.
January 7, 1926.
Rehearing Denied February 22, 1926.
Wm. H. Watkins, of Jackson, Miss. (Watkins, Watkins & Eager, of Jackson, Miss., and Dinsmore, Shohl & Sawyer, of Cincinnati, Ohio, on the brief), for appellant.
S. D. Redmond and Virgil Howie, both of Jackson, Miss. (Howie & Howie, of Jackson, Miss., on the brief), for appellees.
*232 Before WALKER, BRYAN, and FOSTER, Circuit Judges.
BRYAN, Circuit Judge.
In September, 1923, Mary Ragland filed her bill of complaint against the Buckeye Cotton Oil Company, in which she averred that she was the owner of a lot, upon which she had resided for 13 years, in Jackson, Miss., on the south side of Monument street; that on the north side of the street, immediately opposite her home, and about 40 feet away, defendant company had and operated a cotton oil mill and delinting plant in such manner as to cause dirt, dust, lint, and cotton fiber to be thrown and to fall on her lot and into her house, to her damage and to the injury of her health. Mildred Ross, a minor, by Mary Ragland, her next friend and foster mother, at the same time filed a bill in which she averred that she lived in the home of Mary Ragland, and that her health had become permanently impaired by reason of the method of operations carried on at defendant's plant. Both bills prayed for injunction and damages, as well as for any appropriate general or special relief; and were consolidated for trial. On November 10, 1923, after a personal visit to the premises, the district judge granted a temporary injunction against operations as conducted at the oil mill, but refused to interfere with the delinting plant, because he found from a personal inspection that the latter was not in operation, but had been dismantled.
The trial resulted in separate final decrees from which the Buckeye Cotton Oil Company appeals. The decree in Mary Ragland's case enjoins defendant from operating its oil mill in such manner as to throw dust, dirt, or lint in appreciable quantities on plaintiff's premises, and awards to plaintiff $150 as damages to her real estate, and $1,500 as actual damages for personal discomfort, physical pain, and suffering sustained since March 1, 1920, the date of a former judgment for $300 in her favor in a similar suit against the same defendant. The other decree awards to Mildred Ross $5,000 as damages for personal discomfort, physical pain and suffering, and injury to her health; but injunction was denied as unnecessary, because injunction had been issued in the case of Mary Ragland, the owner of the property.
The evidence was taken before a commissioner who did not make any findings of fact. The district judge ordered that the testimony of Mary Ragland be sent up on this appeal in question and answer form, but that all other testimony included at the request of counsel be set forth in strict compliance with paragraph (b) of Equity Rule 75. These instructions were ignored, and the statement of the evidence is nothing more than a transcript, containing more than 900 printed pages of stenographic notes, which purport to contain the testimony of all the witnesses in question and answer form. It also contains, as might be expected, a mass of immaterial matter such as preliminary questions and answers, repetitions, comments of counsel, and colloquies between them and the commissioner. We are now invited to separate the wheat from the chaff. We are expected to select out the testimony that is material in order that we may determine whether assignments of error based upon it are well taken. It is true that in the order allowing an appeal it is required that, "where the testimony of any witness, or witnesses, is included in the præcipe of counsel on either side, the testimony of the witness, or witnesses, be transcribed in its entirety." However, it hardly can be contended that this order was intended to displace the previous requirement, which meant that the testimony should be stated in a simple, concise, and narrative form, and in no event did it contemplate an inclusion in the transcript of anything but testimony.
We are of opinion that equity rule 75 does not contemplate that the trial court will order all the testimony in a case sent up in question and answer form. If particular answers of a witness are subject to different interpretations, the questions which elicited such answers frequently aid in determining which interpretation is correct. For that reason the rule provides, by way of exception, "that if either party desires it, and the court or judge so directs, any part of the testimony shall be reproduced in the exact words of the witness." That rule was designed to prevent the imposition of such a record as this upon an appellate court. Newton v. Consolidated Gas Co., 42 S. Ct. 264, 258 U. S. 165, 66 L. Ed. 538; Houston v. Telephone Co., 42 S. Ct. 486, 259 U. S. 318, 66 L. Ed. 961. It would not serve its purpose if it could be ignored at pleasure, and be supplanted by the easier, though more expensive, method of printing everything that is said by anybody connected with the case during the taking of testimony. We will not enforce the rule in this case, but only for the reason that counsel might have construed the order allowing the appeal to authorize the record in its present shape.
Defendant's cotton oil mill has been located *233 upon its present site since 1908. It is not situated in a strictly manufacturing district. Mary Ragland moved into her present residence in 1910, taking with her Mildred Ross, who at that time was about 15 months old. They have resided at the same place ever since. From some time not definitely fixed by the testimony, perhaps from the beginning, defendant has used what is called the "cyclone system" at its oil mill. Lint from cotton seed is taken from the gin to what is called a "collector" or "cyclone" through a large metal tube or conveyor about 6 feet in diameter by means of a fan in the conveyor midway between the gin and the collector. This fan is about 70 inches in diameter and is propelled at from 500 to 600 revolutions a minute. The lint is forced by the suction of air from the gin to the fan and is blown from the fan to the collector, where it is intended that it shall drop through an opening at the bottom. An opening is provided at the top for the escape of air. When the opening at the bottom of the collector is choked up, the fan forces the lint out through the top. Mary Ragland testified that lint and lint dust are blown over her yard and into her house, during the season of the year in which the mill is operated, continuously day and night, and that the dust is so fine that it gets into her house, onto her clothing, and into her food even when the doors and windows are closed. She claims that this condition has existed to some extent since 1910, and has gradually grown worse. In corroboration, she introduced numerous photographs which go far to sustain her testimony as to conditions existing at the time these suits were instituted. In behalf of defendant testimony was introduced to the effect that conditions shown by these photographs were such as existed only when a breakdown or choke up occurred at the mill, and did not represent normal conditions. Defendant claims that since repairs were made, in compliance with the order of the court, neither dust nor lint escapes in any appreciable quantities. However, defendant's superintendent admitted that at its mill, as operated prior to repairs which were made after suit was brought and temporary injunction issued, there was always a little "haze" of lint or lint dust coming out at the top of the cyclone or collector.
The evidence of physicians called by plaintiffs was to the effect that both Mary Ragland and Mildred Ross were suffering from chronic bronchitis and other respiratory ailments; that Mildred Ross was underdeveloped, undersized, and practically an invalid. Physicians called by defendant testified that plaintiffs appeared to be in fairly good health, but the examinations they made were not very thorough, and in the main their testimony was directed to sustain defendant's theory that the condition of health of both plaintiffs could have been caused by dust from Monument street. That street was paved with pyrites, but the evidence fairly shows that during a drought in 1923 that street was very dusty. Various contradictions were shown between Mary Ragland's testimony in this case and in the case she had against defendant in 1920. They relate principally to the time when she first complained of conditions at defendant's mill. In this case she testified that in her former suit she only asked for damages to her house, and did not claim damages for injury to her health; but her declaration in the earlier suit contained an allegation that in addition to injury to her property, she was "forced to continually breathe and inhale this dust and dirt, much to her physical injury." In an affidavit in support of her application for a temporary injunction, she stated that the delinting plant was not built until 1915, and that until then the neighborhood in which she lived was free from lint and dust from the mill. In giving her testimony before the commissioner, she stated that lint and lint dust were thrown upon her premises from about the time she moved there in 1910.
Mildred Ross testified that in the school year beginning in the fall of 1923 she had been absent from school about two months on account of the condition of her health; but her teacher, Betty Marino, a witness for defendant, testified that Mildred Ross had been absent only seven days, and appeared to be in good health. Betty Marino was sought to be impeached by two witnesses who stated that she told them that she testified as she did through fear of losing her position. Thereupon defendant offered to prove by several witnesses that Betty Marino's reputation for truth and veracity was good; but the District Court, upon exceptions duly taken and reserved, held that such evidence was inadmissible.
Defendant's contentions in support of its appeal are: That at most defendant should have been enjoined from operating its mill so as to throw out lint in unreasonable quantities instead of in appreciable quantities; that it was error to award anything for damages to Mary Ragland's real estate because such damages were not sued for; that it was not shown that any damage to *234 health suffered by either plaintiff was attributable to lint, since it could equally as well have been caused by dust from the street; that the damages awarded are excessive; that all claims were barred because defendant's mill was operating at its present location when plaintiffs took up their residence across the street from it; and that the court erred in excluding testimony of the good reputation of the witness Betty Marino for truth and veracity.
Defendant claims that since it made repairs to its mill in 1923, it is impossible for lint to escape at all. It therefore would seem to appear that "appreciable" and "unreasonable," as used in the decree appealed from, mean practically the same thing. At least, it does not appear that defendant has been injured by the wording of the decree.
There was a prayer for general relief, and facts were stated which entitled Mary Ragland to recover for damage done to her house. This we think was sufficient. 10 R. C. L. 422.
Of course, it is true that if plaintiffs had not gone any further than to show injury, and had left it uncertain whether that injury was caused by lint from the mill or dust from the street, they would not have been entitled to recover. But it is hardly open to doubt that lint was the cause of whatever damages plaintiffs suffered. The mill was in operation day and night over a long period of years. The street had been paved, and it is not shown for how long a time passing vehicles would scatter dust, nor that dust was thrown from the street during the whole 24 hours of the day. The most defendant can insist on is that dust from the street might have been a contributing cause for a part of the time. Defendant invokes Mary Ragland's former testimony for the purpose of showing that in this case she willfully perjured herself in stating conditions at the mill in 1910, and therefore ought to be denied relief even though she has a meritorious case. It is not a matter to excite suspicion or cause surprise that the testimony of this witness in 1920 should fail to coincide with that given by her three or four years later with reference to the date of an event that occurred long before she first testified about it. The contradictions could well have been attributed by the district judge to forgetfulness; especially in view of the statement of defendant's superintendent that it was impossible to operate its cotton oil mill prior to the making of repairs in 1923 without causing lint and lint dust to escape from the cyclone.
It is not reasonable to suppose that Mary Ragland, who appears from her testimony to be an ignorant negro woman, was familiar enough with the declaration in her former suit to be chargeable with the knowledge that it sought recovery for injury to her health as well as damage to her house. Nor ought she to be held unworthy of belief merely because she signed an affidavit, which was doubtless prepared by her counsel, in support of her application for a temporary injunction, in which it was stated that the delinting plant was not built until 1915, and that the lint and dust came from it instead of from the mill. It is not unusual for honest mistakes to be made in papers which are filed in court. Usually such mistakes are made by the attorney rather than by the client. It is quite apparent from this affidavit that plaintiffs thought the delinting plant was the cause of the conditions complained of. That this was a mistaken idea appears from the order of the district judge, who enjoined operations as carried on at the oil mill, but who upon inspection found that the delinting plant had been dismantled.
We are unable to say that the damages are excessive. While it is true that the district judge did not hear the testimony, yet it appears without contradiction that he was at the home of Mary Ragland when he made a personal visit to defendant's plant. The damages awarded to Mary Ragland are reasonable if only she suffered the discomfort and inconvenience of which she complains, even though her health had not been permanently impaired. If it once be conceded that Mildred Ross' condition is attributable to defendant's method of operating its mill, it cannot fairly be insisted that the damages she recovered are excessive.
Defendant's plant was not located in a district used exclusively for manufacturing purposes. The doctrine of "coming to a nuisance" does not apply. Bispham's Equity (10th Ed.) § 442; 20 R. C. L. 495.
We recognize that there is conflict of authority upon the question whether the testimony of character witnesses is admissible to support the testimony of a witness who has been contradicted, but whose character has not been attacked. In Ford v. United States, 3 F.(2d) 104, we held that such testimony was not admissible to sustain a witness who had merely been contradicted in the testimony he gave at the trial. We think the rule there announced also extends to a case where the contradiction relates to self-contradictory statements of the same witness. 2 Wigmore on Evidence, § 1108. Contradiction *235 of a statement, whether made in or out of court, does not necessarily involve the implication of perjury, but may equally as well be attributed to the faulty memory of a truthful witness.
The decrees are affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543262/ | 39 F.2d 849 (1930)
PENNEY & LONG, Inc.,
v.
COMMISSIONER OF INTERNAL REVENUE.
No. 2926.
Circuit Court of Appeals, Fourth Circuit.
April 8, 1930.
Julius C. Smith, of Greensboro, N. C. (E. S. Parker, Jr., of Greensboro, N. C., on the brief), for petitioner.
A. H. Conner, Sp. Asst. to Atty. Gen. (G. A. Youngquist, Asst. Atty. Gen., Sewall Key, Sp. Asst. to Atty. Gen., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, of Washington, D. C., on the brief), for respondent.
Before PARKER and NORTHCOTT, Circuit Judges, and HAYES, District Judge.
NORTHCOTT, Circuit Judge.
This is an appeal from an order of redetermination of the Board of Tax Appeals, involving a deficiency in income and profits tax in the amount of $23,934.94, for the calendar year 1920, under the Revenue Act of 1918, which reads in part as follows:
"Sec. 202. (a) That for the purpose of ascertaining the gain derived or loss sustained from the sale or other disposition of property, real, personal, or mixed, the basis shall be * * *
"(b) When property is exchanged for other property, the property received in exchange shall for the purpose of determining gain or loss be treated as the equivalent of cash to the amount of its fair market value, if any. * * *" 40 Stat. 1060.
In May, 1926, the Commissioner of Internal Revenue assessed additional tax against petitioner for income and excess profits taxes, in the above amount, for the calendar year 1920. From this finding of the Commissioner, petitioner appealed to the Board of Tax Appeals on two grounds: (1) That the Commissioner erred in holding that it realized the profit of $50,125 upon a sale of the contract, hereinafter mentioned; and (2) in excluding the price paid by the petitioner for the contract referred to in the first assignment, in the invested capital of the petitioner. The Board, after hearing, sustained the finding of the Commissioner, from which action this appeal was taken.
No transcript of the evidence is in the record, and reliance must be had upon the findings of fact promulgated by the Board, which the petitioner agrees are binding upon it.
The pertinent facts found by the Board are as follows: That in May 1919, a partnership, composed of C. B. Penney, Ralph Long, R. J. Mebane, and J. E. Rossell, was organized, under the firm name of Penney & Long, for the purpose of acting as distributor *850 in several Southern states for automobiles manufactured by the American Motors Corporation. Each of the four partners contributed $3,000 cash to the capital of the partnership. A distributor's contract was secured, without any cost to the partnership.
Petitioner corporation was organized on September 12, 1919, for the purpose of taking over the partnership assets and business. The four partners sold and transferred to the petitioner corporation their business, and all assets, consisting of the contract in question, cash in bank, accounts receivable, notes receivable, used cars, and furniture and fixtures, in consideration of the issue to each of them of class A common stock of a par value of $12,500, and class B common stock of a par value of $31.25, an aggregate par value of $50,125.
Fifteen or sixteen automobiles were sold by the partnership, between the organization of the partnership and the organization of the petitioner corporation. That, while no appraisal was made of, nor any specific value placed on, the contract with the American Motors Corporation, the partners, who also controlled a majority of the stock of petitioner, considered that stock of the par value of $12,000 was in payment for the tangible assets and the return of their original contributions of $3,000 each, to the partnership capital, and the balance was in payment for the contract.
That between September 18, 1919, and March 16, 1920, the petitioner sold shares of its class A common stock, of a total par value of $48,250, for cash and notes, at par, and of the total amount so disposed of, shares of a total par value of $27,500 were sold within the first thirty days after organization. All of this stock was sold to relatives, friends, and business associates of the former partners, and upon the solicitations of the latter. None of petitioner's capital stock was offered for sale to the general public. Purchasers of this stock were made acquainted with all of the details of the distributor's contract which the petitioner had acquired; and though, in soliciting their subscriptions for stock, no specific value was placed upon the contract, representations were made to them that, because of its favorable discount terms, the excellent territory allotted, and the shortage of automobiles within that territory, the contract offered very great possibilities of making large profits.
In July, 1920, the petitioner assigned the distributor's contract to the American Southern Motors Corporation in exchange for $50,125 par value of that company's capital stock. This stock was sold by the petitioner in 1920, for $50,125 cash.
Shortly after the petitioner acquired the business, the American Motors Corporation made a change in the model of cars they were producing. The new model proved very unsatisfactory mechanically, and resulted in the bankruptcy of the manufacturers early in 1921.
At the hearing before the Board petitioner abandoned its contention as to point 2, and admitted that, under the provisions of section 331 of the Revenue Act of 1918 (40 Stat. 1095), the partners having retained more than 50 per centum of the stock of petitioner corporation, petitioner had no right to include any part of the purchase price paid for the contract in its invested capital.
In its opinion sustaining the action of the Commissioner in holding the entire sum realized by petitioner on the sale of the contract to the American Southern Motors Corporation to be profit, the Board of Tax Appeals bases its conclusion on the fact that no fixed or definite price that the petitioner paid for the contract was proven. With this conclusion we cannot agree. It is true that the finding of the Commissioner is prima facie correct, and the burden of proving its incorrectness is on the taxpayer, Brooks v. Commissioner of Internal Revenue (C. C. A.) 35 F.(2d) 178, and authorities there cited. This burden, however, we believe to have been carried by petitioner in the hearing before the Board, and we reach this conclusion from the findings of fact made by the Board itself.
The original partnership received stock of the par value of $50,125 for the contract and the other property of the partnership. It appears from the finding of fact that the other property of the partnership could not possibly have exceeded in value $12,000, as that was the total amount paid in by the four partners, and the business had been conducted as a partnership from May to September, during which time only fifteen or sixteen automobiles had been sold. It is evident, therefore, that, taking into consideration the expense of conducting business for that length of time and the small number of sales made, the physical property of the partnership could not have increased in amount above the original investment, and that the price fixed on the contract in the transfer from the partnership to the petitioner company was at least $38,000, possibly more. Stock similar to that given to the partners for the property of the partnership was sold in a comparative large quantity at par.
*851 It is true it was sold largely to friends and relatives of the incorporators of the petitioner company, but we think it only fair to assume that that which brought par in even the limited market was worth par to the petitioner when given by it as consideration for the contract. We, therefore, reach the conclusion, which seems to us not only proper but inevitable, that the price not only agreed on but paid for the contract in the first transfer was, at least, $38,000. One or more of the partners testified to these facts before the Board. In addition to this, within a year from the date of the acquiring of the contract by the petitioner company, it exchanged it, and nothing else, for stock of the par value of $50,125, which stock was shortly afterwards sold by the petitioner for $50,125 cash.
The very language of the statute itself, "to the amount of its fair market value," presupposes the making of some estimate and the exercise of some judgment on the part of the Commissioner in finding, from all the circumstances, what a "fair market value" may have been. Here we have present every element of proof that would not only justify but, in all fairness, compel the Commissioner to fix as a "fair market value" of the stock issued by the petitioner, in payment for the contract, the sum of $38,000.
We conclude, therefore, that, at the time of the purchase of this contract by petitioner, the contract had a real value whatever may have been its future history; that that value was not less than $38,000; that, when petitioner realized from the sale of the contract $50,125, its profits on the sale were not more than $12,125, and not $50,125, as fixed by the Commissioner and the Board of Tax Appeals.
The transactions between the partnership and the petitioner corporation, in the absence of fraud, were legal under the laws of the state of North Carolina, in which state the petitioner was incorporated. See Gover v. Malever, 187 N. C. page 774, 122 S.E. 841.
It is well settled as a principle of the law that in construing tax statutes well-founded doubts engendered in attempting to apply the statute must be resolved in favor of the taxpayer. State of Ohio v. Harris (C. C. A.) 229 F. 892, and authorities there cited.
For the reasons above stated, the action of the Board of Tax Appeals is reversed, and this cause is remanded to the court below to be further proceeded with in accordance with the opinion above expressed.
Reversed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919449/ | 75 Md. App. 314 (1988)
541 A.2d 183
STEVEN ADAM SCHOCHET
v.
STATE OF MARYLAND.
No. 864, September Term, 1987.
Court of Special Appeals of Maryland.
May 19, 1988.
Joseph Peter Suntum (Boyland & Thompson, Bethesda, and Alan H. Murrell, Public Defender of Baltimore, on the brief), for appellant.
Stephen J. Shapiro, Kathleen M. Boucher and Whiteford, Taylor & Preston, Baltimore, for amicus curiae American Civil Liberties Union of Maryland, Inc.
Gary E. Bair, Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen., Baltimore, Andrew L. Sonner, State's Atty. for Montgomery County, and Robert L. Dean, Asst. State's Atty. for Montgomery County, on the brief), Rockville, for appellee.
Argued before MOYLAN, WILNER and GARRITY, JJ.
MOYLAN, Judge.
The appellant, Steven Adam Schochet, was convicted by a Montgomery County jury, presided over by Judge Irma S. Raker, of an Unnatural and Perverted Sexual Practice (fellatio) prohibited by Md. Ann. Code, Art. 27, § 554. Upon this appeal, he raises three contentions:
1. That § 554 is unconstitutional as applied to private and noncommercial sexual acts between consenting heterosexual adults;
2. That Judge Raker impermissibly considered at sentencing both trial testimony and the victim impact statement concerning alleged offenses of which the appellant had been acquitted; and
3. That the imposition of a five-year sentence for this conviction constituted cruel and unusual punishment under the Eighth Amendment.
It is the first of these claims that commands our primary attention. We are called upon to determine the constitutionality, under the Federal Constitution, of a legislative act criminalizing certain forms of private, noncommercial sexual behavior between consenting, unmarried, heterosexual adults.
How This Issue Arose
It took an unusual configuration of jury verdicts for this issue to arise. Eight charges were filed against the appellant, based upon three alleged sexual episodes. For an act of vaginal intercourse, the appellant was charged with rape, both in the first and second degrees. For acts of fellatio and anal intercourse, respectively, the appellant was charged with two separate sexual offenses, each involving counts for both first and second degrees. All six of those charges alleged greater or lesser force, as appropriate, and the lack of consent on the part of the victim. For the anal intercourse and the fellatio, respectively, the appellant was charged with violations of Art. 27, §§ 553 and 554. Neither of these charges required proof of force or absence of consent.
According to the State's witness, all three sexual acts were forced upon her by the appellant. The appellant acknowledged that both vaginal intercourse and fellatio took place but claimed that those acts were consensual. He denied that the anal intercourse ever took place. The verdicts strongly suggest that the jury did not believe the alleged victim's testimony beyond a reasonable doubt. The appellant was acquitted of all six charges involving force. He was also acquitted of the count charging anal intercourse. He was convicted only of a violation of § 554, which charged an "unnatural and perverted sexual practice," in this case fellatio.
The Appellant's Raising of the Issue
The appellant timely raised the issue of the constitutionality of § 554 as applied to consenting, unmarried, heterosexual adults. Prior to trial, he moved to dismiss the count on the ground that the statute is unconstitutional as applied to a private consensual act between heterosexual adults. Judge Raker denied the motion. At the close of the case, the appellant requested a jury instruction that consent would be a valid defense to a charge under § 554. On the basis of our holding in Gooch v. State, 34 Md. App. 331, 367 A.2d 90 (1976), Judge Raker declined to give the requested instruction.
A Federal Constitutional Issue
The issue before us involves exclusively the Federal Constitution. The claim is that § 554 as applied to consenting adults violates the right to privacy, a recently articulated although unenumerated right under the Federal Constitution, which has been identified and developed in a series of Supreme Court decisions that we will discuss at some length. This is not an issue under the Maryland Constitution or Declaration of Rights. Neville v. State, 290 Md. 364, 372 n. 5, 430 A.2d 570 (1981); Doe v. Commander, Wheaton Police Dep't, 273 Md. 262, 329 A.2d 35 (1974); Montgomery County v. Walsh, 274 Md. 502, 336 A.2d 97 (1975).
Appellate Standing
When a challenge is raised that a statute is unconstitutional because of overbreadth, courts traditionally decline to allow a litigant to assert a claim vicariously for others as to whom the application of the statute might be unconstitutional if the litigant himself is not a member of that possibly protected class.
The constitutional issue is that of whether there is some substantive due process right of privacy shielding from state regulation 1) noncommercial, 2) consensual, 3) private, and 4) adult sexual activity. Wherever one of those qualifying criteria is shown to be lacking, courts have regularly avoided the larger question by holding that the claimant lacks standing to vindicate the constitutional rights of others more favorably situated. If a defendant is shown to have engaged in a sexual act for hire, he is disentitled to litigate what the constitutional right might be if the sexual act had been noncommercial. Cherry v. State, 18 Md. App. 252, 264-266, 306 A.2d 634 (1973). If a defendant is shown to have engaged in a sexual act by force, he is disentitled to litigate what the constitutional right might be if the sexual act had been consensual. Commonwealth v. Balthazar, 366 Mass. 298, 318 N.E.2d 478 (1974). If a defendant is shown to have engaged in a sexual act in a public or even quasi-public place, he is disentitled to litigate what the constitutional right might be if the sexual act had been in private. Neville v. State, 290 Md. 364, 430 A.2d 570 (1981). If a defendant is shown to have engaged in a sexual act with a minor, he is disentitled to litigate what the constitutional right might be if the sexual act had been between two adults. Hughes v. State, 14 Md. App. 497, 287 A.2d 299 (1972).
These are but instances of the general principle discussed by the Supreme Court in Broadrick v. Oklahoma, 413 U.S. 601, 93 S. Ct. 2908, 37 L. Ed. 2d 830 (1973), which is applicable to claims that a statute is unconstitutional because of overbreadth. In addition to admonishing us that "application of the overbreadth doctrine in this manner is, manifestly, strong medicine," and that "it has been employed by the Court sparingly and only as a last resort," 413 U.S. at 613, 93 S.Ct. at 2916, the Court clearly stated the standing limitation:
"Embedded in the traditional rules governing constitutional adjudication is the principle that a person to whom a statute may constitutionally be applied will not be heard to challenge that statute on the ground that it may conceivably be applied unconstitutionally to others, in other situations not before the Court."
Id. at 610, 93 S. Ct. at 2915.
The appellant here was not disentitled to raise the issue in any regard. There is no suggestion that the act of fellatio in question was commercial, public, or involved a minor. In terms of its consensual quality, the evidence clearly permitted a finding that the act was consensual. The appellant is thereby entitled to a ruling on the constitutionality of the statute as applied to a private act between consenting, unmarried, heterosexual adults.
The Classes of Persons Possibly Entitled to the Constitutional Right
When none of the impediments to standing is present, the claimant moves up to the plateau of the constitutional merits. At that level, the claimant will fall into one of three classes that may have constitutional significance: part of 1) a homosexual couple (male or female); 2) an unmarried heterosexual couple; or 3) a married heterosexual couple, in a roughly ascending hierarchy of favor. When, approximately twenty years ago, this new constitutional issue began to push for resolution, there were four possibilities. It could have been that all three classes would be determined to enjoy a constitutional right of privacy in their sex lives. It could have been that none of the three classes would be constitutionally shielded from the anti-sodomy laws. It could be that only married heterosexuals will enjoy a constitutional right of privacy in their sex lives, with the other two classes constitutionally bereft. It could be that only homosexuals will suffer the sting of the anti-sodomy laws, with the other two classes constitutionally protected.
One ambiguity has now been removed. It is now clear beyond room for disagreement that the Supreme Court has announced that there is no constitutional right of privacy to engage in homosexual acts. Doe v. Commonwealth's Attorney for City of Richmond, 425 U.S. 901, 96 S. Ct. 1489, 47 L. Ed. 2d 751 (1976); Bowers v. Hardwick, 478 U.S. 186, 106 S. Ct. 2841, 92 L. Ed. 2d 140 (1986). The issue in Bowers v. Hardwick was squarely posed:
"The issue presented is whether the Federal Constitution confers a fundamental right upon homosexuals to engage in sodomy and hence invalidates the laws of the many States that still make such conduct illegal and have done so for a very long time. The case also calls for some judgment about the limits of the Court's role in carrying out its constitutional mandate."
478 U.S. at 190, 106 S. Ct. at 2843, 92 L.Ed.2d at 145. The Supreme Court held flatly that the Constitution conferred no such right. "[R]espondent would have us announce, as the Court of Appeals did, a fundamental right to engage in homosexual sodomy. This we are quite unwilling to do." 478 U.S. at 191, 106 S.Ct. at 2844, 92 L. Ed. 2d at 146.
Our concern in this case, of course, is with unmarried heterosexuals. The case of married heterosexuals is not before us and we do not even speculate as to what the privacy implications might be for members of that class.
In the wake of Bowers v. Hardwick, we are left with two possibilities. It may be that the Supreme Court will ultimately determine that the decision to participate in unorthodox sexual activity is simply not a fundamental value, regardless of whether the participants are homosexual or heterosexual, married or unmarried. A number of the right to privacy cases, however, speak in such glowing terms of the sacrosanct intimacy of the marital union that the Supreme Court might determine that unorthodox sexual activity within marriage does enjoy a right to privacy. In that case, we would be called upon to determine whether unmarried heterosexuals are closer doctrinally to married heterosexuals, who would be protected, or unmarried homosexuals, who have already been determined not to be protected. We would have to determine whether the line that separates the protected class from the unprotected class was based upon the difference between heterosexuality and homosexuality or upon the difference between marriage and non-marriage.
In either event, our starting point must be to examine the development of this unenumerated right to privacy and to see whether the Supreme Court has yet said anything that would suggest that our § 554 is unconstitutional as applied to unmarried heterosexuals.
The Scope of the Right to Privacy: Its Growth and Its Limitations
As we undertake our reading of that case law, we are conscious that we are not writing on a clean slate. In the first place, we are not writing upon our own slate. We are not projecting meaning into the Maryland Constitution. We are attempting to forecast the probable content of the Federal Constitution.
We are writing on a slate, moreover, one-third of which has already been filled in by the Supreme Court. On the basis of that part of the constitutional picture already completed, we are called upon to make an honest prediction of what we think the remaining unfinished part of the picture will turn out to be.
It is not for us to make our own value judgment as to what we think the federal constitutional right to privacy ought to be. Our obligation, rather, is to read the multitudinous signs and indications the Supreme Court has provided and, from them, to make an intellectually neutral assessment of what we think the federal constitutional right actually is and is not.
Those multitudinous signs and indications are to be found in five major and four minor decisions of the Supreme Court. The minor decisions include a harbinger dissenting opinion in Poe v. Ullman, 367 U.S. 497, 81 S. Ct. 1752, 6 L. Ed. 2d 989 (1961); two essentially tangential opinions in Loving v. Virginia, 381 U.S. 1, 87 S. Ct. 1817, 18 L. Ed. 2d 1010 (1967), and Stanley v. Georgia, 394 U.S. 557, 89 S. Ct. 1243, 22 L. Ed. 2d 542 (1969); and a summary disposition in Doe v. Commonwealth's Attorney for City of Richmond, 425 U.S. 901, 96 S. Ct. 1489, 47 L. Ed. 2d 751 (1976).
The essential body of Supreme Court law upon the right to privacy, however, is in five decisions that range from 1965 through 1986. They are Griswold v. Connecticut, 381 U.S. 479, 85 S. Ct. 1678, 14 L. Ed. 2d 510 (1965); Eisenstadt v. Baird, 405 U.S. 438, 92 S. Ct. 1029, 31 L. Ed. 2d 349 (1972); Roe v. Wade, 410 U.S. 113, 93 S. Ct. 705, 35 L. Ed. 2d 147 (1973); Carey v. Population Services Int'l, 431 U.S. 678, 97 S. Ct. 2010, 52 L. Ed. 2d 675 (1977); and Bowers v. Hardwick, 478 U.S. 186, 106 S. Ct. 2841, 92 L. Ed. 2d 140 (1986). The scope of the right to privacy and the limitations upon the right are to be found within that finite body of source material.
Although the constitutional right to privacy was first recognized in 1965, the harbinger appeared four years earlier in the dissenting opinion of Justice Harlan in Poe v. Ullman, 367 U.S. 497, 81 S. Ct. 1752, 6 L. Ed. 2d 989 (1961). Before the Court was the same Connecticut statute, criminalizing the prescribing of any contraceptive drug or device, that would be back before the Court four years later in Griswold v. Connecticut. On the first occasion, however, a five-to-four majority decided that there was no justiciable controversy and declined to reach the merits. Judge Harlan's opinion, dissenting only on the issue of justiciability, developed fully a theory of constitutional right to privacy grounded firmly in the due process clause. Justice Harlan's opinion was not only the first full exposition of the right but it, in turn, was relied upon extensively by Justice Goldberg's concurring opinion in Griswold v. Connecticut, joined in by Chief Justice Warren and Justice Brennan. It was fully incorporated, moreover, into Justice Harlan's own concurring opinion in Griswold.
In both the archetypal case of Griswold v. Connecticut and its forerunner of Poe v. Ullman, the newly recognized right to privacy was grounded solidly in the venerable status of the institution of marriage. Although subsequent applications of the right would move outward from that base, the hard core remained the sanctity of the marital union. The Harlan opinion in Poe v. Ullman, which is our starting point, stressed the intimacy of the marital relationship as the foundation of the protection:
"I believe that a statute making it a criminal offense for married couples to use contraceptives is an intolerable and unjustifiable invasion of privacy in the conduct of the most intimate concerns of an individual's personal life." (Emphasis in original).
367 U.S. at 539, 81 S. Ct. at 1774 (Harlan, J., dissenting). Justice Harlan went on to characterize the nature of the intrusion by the State of Connecticut that made it unconstitutional:
"[T]he State is asserting the right to enforce its moral judgment by intruding upon the most intimate details of the marital relation with the full power of the criminal law."
Id. at 548, 81 S. Ct. at 1779.
Four years later, Griswold v. Connecticut delivered what the Poe v. Ullman dissent had promised. Justice Douglas identified the institution of marriage as "a relationship lying within the zone of privacy created by several fundamental constitutional guarantees." 381 U.S. at 485, 85 S.Ct. at 1682. The rock on which Justice Douglas erected the right to privacy was the institution of marriage:
"We deal with a right of privacy older than the Bill of Rights older than our political parties, older than our school system. Marriage is a coming together for better or for worse, hopefully enduring, and intimate to the degree of being sacred. It is an association that promotes a way of life, not causes; a harmony in living, not political faiths; a bilateral loyalty, not commercial or social projects."
Id. at 485-486, 85 S. Ct. at 1682.
Indeed, Justice Douglas cited, as support for this protection of the marital or family unit, two decisions from the heyday of the Lochner v. New York [198 U.S. 45, 25 S. Ct. 539, 49 L. Ed. 937 (1905)] era in which the Supreme Court used substantive due process to strike down state statutes that interfered not with the liberty of contract but with the liberty of the family unit to make parental decisions involving the education of the children. Meyer v. Nebraska, 262 U.S. 390, 43 S. Ct. 625, 67 L. Ed. 1042 (1923); Pierce v. Society of Sisters, 268 U.S. 510, 45 S. Ct. 571, 69 L. Ed. 1070 (1925).
As Justice Douglas reached his rhetorical height in explaining why there must be a constitutional right to privacy, it is clear that in his reference to "the sacred precincts of marital bedrooms," the presence of the qualifying adjective "marital" was not inadvertent. We must remember that it was a bedroom, occupied by consenting adults, that was deemed to be without any constitutional right to privacy in Bowers v. Hardwick. The critical difference between the bedroom protected in Griswold and the bedroom not protected in Bowers v. Hardwick is that the former was a marital bedroom and the latter was not:
"Would we allow the police to search the sacred precincts of marital bedrooms for telltale signs of the use of contraceptives? The very idea is repulsive to the notions of privacy surrounding the marriage relationship." (Emphasis supplied).
381 U.S. at 485, 85 S. Ct. at 1682.
The concurring opinion of Justice Goldberg, joined by Chief Justice Warren and Justice Brennan, similarly left no doubt that the "concept of liberty" there being dealt with "embraces the right of marital privacy." 381 U.S. at 486, 85 S.Ct. at 1683. Justice Goldberg's concurrence relied heavily on the dissenting opinion of Justice Harlan in Poe v. Ullman, basing the newly recognized constitutional right on the sanctity of marriage:
"I agree with Mr. Justice Harlan's statement in his dissenting opinion in Poe v. Ullman, ...: `Certainly the safeguarding of the home does not follow merely from the sanctity of property rights. The home derives its pre-eminence as the seat of family life. And the integrity of that life is something so fundamental that it has been found to draw to its protection the principles of more than one explicitly granted Constitutional right.... Of this whole "private realm of family life" it is difficult to imagine what is more private or more intimate than a husband and wife's marital relations.'" (Citation omitted).
381 U.S. at 495, 85 S. Ct. at 1687-88. (Goldberg, J., concurring).
Justice White's concurring opinion was equally certain that the Connecticut anti-contraception statute was unconstitutional "as applied to married couples." 381 U.S. at 502, 85 S.Ct. at 1691 (White, J., concurring). Justice Harlan concurred "[f]or reasons stated at length in my dissenting opinion in Poe v. Ullman." 381 U.S. at 500, 85 S.Ct. at 1690 (Harlan, J., concurring).
The importance for us of identifying the source of the right to privacy is clear. The holding of Bowers v. Hardwick that the homosexual plaintiffs there were not covered by the right to privacy is not, of course, dispositive of our decision with respect to the heterosexual appellant here. The reason behind that holding, however, might be determinative of the result we reach here. On the basis of Griswold v. Connecticut and Poe v. Ullman, the possibility arises that the reason the plaintiffs in Bowers v. Hardwick were barred from the coverage of the right to privacy was because their sexual intimacy lacked the unique imprimatur of the marital union, not because it lacked the quality of heterosexuality.
Two cases, decided shortly after Griswold and generally cited as examples of the developing constitutional right of privacy, are only tangential. Loving v. Virginia, 388 U.S. 1, 87 S. Ct. 1817, 18 L. Ed. 2d 1010 (1967), struck down a Virginia statute forbidding interracial marriage as a violation of the equal protection clause. The entire thrust of the opinion dealt with equal protection and Griswold was not even mentioned. Virtually as an afterthought, the concluding two paragraphs made the observation that the Virginia statute also violated the due process clause. The only pertinent observation was, "The freedom to marry has long been recognized as one of the vital personal rights essential to the orderly pursuit of happiness by free men." 388 U.S. at 12, 87 S.Ct. at 1824. The right to privacy was still rooted in the protection of the institution of marriage.
Stanley v. Georgia, 394 U.S. 557, 89 S. Ct. 1243, 22 L. Ed. 2d 542 (1969), struck down a Georgia anti-pornography statute to the extent that it criminalized the possession and enjoyment of pornography by an adult in the privacy of the home. The holding of the Supreme Court was based totally on the First Amendment's freedoms of speech and of the press, which were held to protect the right to receive information and ideas. The Court simply mentioned, in passing, that the First Amendment right took on an added dimension when it was exercised "in the privacy of a person's own home." 394 U.S. at 564, 89 S.Ct. at 1247. There was no analysis of a constitutional right to privacy. The total reference was as follows:
"Moreover, in the context of this case a prosecution for mere possession of printed or filmed matter in the privacy of a person's own home that right takes on an added dimension. For also fundamental is the right to be free, except in very limited circumstances, from unwanted governmental intrusions into one's privacy." (Emphasis supplied).
Id.
In Paris Adult Theatre I v. Slaton, 413 U.S. 49, 93 S. Ct. 2628, 37 L. Ed. 2d 446 (1973), the appellant attempted to expand the First Amendment protection of Stanley v. Georgia into a due process right of autonomy for consenting adults to enjoy pornography in a motion picture house. The argument was that the State of Georgia had not shown a substantial relationship between the social purpose sought to be served and the legislative means employed. The Supreme Court noted that the petitioners had urged that "absent such a demonstration, any kind of state regulation is `impermissible.'" 413 U.S. at 60, 93 S.Ct. at 2636. In rejecting any idea that the State had to make such a showing, the Supreme Court stated:
"We reject this argument. It is not for us to resolve empirical uncertainties underlying state legislation, save in the exceptional case where that legislation plainly impinges upon rights protected by the Constitution itself.[11]
[11] Mr. Justice Holmes stated in another context, that:
`[T]he proper course is to recognize that a state legislature can do whatever it sees fit to do unless it is restrained by some express prohibition in the Constitution of the United States or of the State, and that Courts should be careful not to extend such prohibitions beyond their obvious meaning by reading into them conceptions of public policy that the particular Court may happen to entertain.'"
(Emphasis supplied).
Id. The majority recognized the right to privacy as one of those "fundamental rights" to be found in the Constitution. It tightly narrowed its compass to a few select subjects, which did not include sexual relations of any sort by anyone outside of marriage:
"Our prior decisions recognizing a right to privacy guaranteed by the Fourteenth Amendment included `only personal rights that can be deemed "fundamental" or "implicit in the concept of ordered liberty." ...'... This privacy right encompasses and protects the personal intimacies of the home, the family, marriage, motherhood, procreation, and child rearing." (Citations omitted) (Emphasis supplied).
Id. at 65, 93 S. Ct. at 2639.
The next major development was one that is pivotal to the appellant's argument here. The case was that of Eisenstadt v. Baird, 405 U.S. 438, 92 S. Ct. 1029, 31 L. Ed. 2d 349 (1972). It struck down as unconstitutional a Massachusetts statute that made it a crime to dispense contraceptive drugs or articles to unmarried persons. The possible punishment was five years. It has sometimes been argued, as the appellant argues here, that Eisenstadt v. Baird holds that whatever right of privacy was recognized for married couples in Griswold is to be extended broadly to unmarried persons as well. The opinion, on careful reading, simply does not stand for that.
Although the particular inhibition on the married couple in Griswold had been one barring their receipt of information about contraception, the aura of sacrosanct status cast over the institution of marriage by the opinion was far broader than the mere right to receive information about contraception. The fact, therefore, that an unmarried person might be equally entitled to receive information about contraception by no means implies that the more sweeping intimations of Griswold would necessarily be extended as well. Indeed, the very language of Eisenstadt v. Baird relied upon by the appellant ties the extension of the right down to matters affecting "the decision whether to bear or beget a child":
"If the right of privacy means anything, it is the right of the individual, married or single, to be free from unwarranted governmental intrusion into matters so fundamentally affecting a person as the decision whether to bear or beget a child." (Emphasis supplied).
405 U.S. at 453, 92 S. Ct. at 1038.
Even that limiting language must be handled cautiously. Justice Brennan's opinion for the Court spoke only for a plurality of four justices.[1] Even the plurality, moreover, explicitly declined to hold that Griswold's right to privacy was involved. They decided the case, rather, on the basis of the equal protection clause:
"[I]f we were to conclude that the Massachusetts statute impinges upon fundamental freedoms under Griswold, the statutory classification would have to be not merely rationally related to a valid public purpose but necessary to the achievement of a compelling state interest.... But ... we do not have to address the statute's validity under that test because the law fails to satisfy even the more lenient equal protection standard." (Citations omitted) (Emphasis supplied).
405 U.S. at 447 n. 7, 92 S. Ct. at 1035 n. 7.
The plurality opinion first explored the possible purpose of the statute. For a number of reasons, not here pertinent, it concluded that no public health purpose was involved. It then explored the possibility that the purpose of the statute was to deter premarital sexual relations. An earlier Massachusetts decision had, indeed, held that the statutory purpose was to promote good morals through "regulating the private sexual lives of single persons." Sturgis v. Attorney General, 358 Mass. 37, 260 N.E.2d 687 (1970). The Supreme Court opinion conceded that, if the deterrence of premarital sex were the purpose, the statute would not offend the equal protection clause (or, presumably, the due process clause either). It went on to conclude, however, that the deterrence of premarital sex was not the purpose of the statute:
"Conceding that the State could, consistently with the Equal Protection Clause, regard the problems of extra marital and premarital sexual relations as `[e]vils ... of different dimensions and proportions, requiring different remedies,' ... we cannot agree that the deterrence of premarital sex may reasonably be regarded as the purpose of the Massachusetts law." (Citation omitted).
405 U.S. at 448, 92 S. Ct. at 1035. Five reasons persuaded the plurality that the Massachusetts statute was not directed toward the deterrence of premarital sex: 1) It did not believe that Massachusetts would rationally "prescribe ... pregnancy and the birth of an unwanted child as punishment for fornication, which is a misdemeanor." Id. 2) It believed that banning the distribution of contraceptives had "at best a marginal relation" to the objective of deterring sex before marriage. 3) It concluded that the means were clearly inefficacious to the achievement of the end in that contraceptive devices were readily available to married and unmarried persons alike to prevent the spread of disease; they were simply not available for contraceptive purposes. 4) It found highly dubious the fact that no inquiry was made into the uses to which married persons would put the contraceptive devices:
"[I]n making contraceptives available to married persons without regard to their intended use, does Massachusetts attempt to deter married persons from engaging in illicit sexual relations with unmarried persons. Even on the assumption that the fear of pregnancy operates as a deterrent to fornication, the Massachusetts statute is thus so riddled with exceptions that deterrence of premarital sex cannot reasonably be regarded as its aim."
Id. at 449, 92 S. Ct. at 1036. 5) Since the consummated crime of fornication carried only a thirty dollar fine or three months in jail, it would be bizarrely disproportionate to punish the mere aider or abettor, who but furnished the contraceptive device, potentially to twenty times the maximum punishment available for the principal offender. For all of those reasons, the opinion concluded that the deterrence of premarital sex was not the legislative aim.
The opinion found that the legislative purpose, rather, was to treat contraception, per se, as immoral and to inhibit it. Under that rationale, Massachusetts "could not, consistently with the Equal Protection Clause, outlaw distribution to unmarried but not to married persons. In each case the evil, as perceived by the State, would be identical, and the underinclusion would be invidious." Id. at 454, 92 S. Ct. at 1038. It was in this context that the plurality opinion held:
"[W]hatever the rights of the individual to access to contraceptives may be, the rights must be the same for the unmarried and the married alike."
Id. at 453, 92 S. Ct. at 1038.
The significance of the Eisenstadt v. Baird decision has been explained by Comment, Survey on the Constitutional Right to Privacy in the Context of Homosexual Activity, 40 U.Miami L.Rev. 521 (1986):
"[A]lthough the state could prohibit sexual activity among unmarried individuals, the state could not indirectly restrain procreative choices." (Footnotes omitted).
Id. at 573. The Comment went on to note carefully that the Eisenstadt decision was based "on individual choice, but the individual choice at issue was procreational not sexual." Id. at 574. The Comment concluded:
"Within the marital context of Griswold, Eisenstadt merely held that individuals may have equal access to contraceptives, and not that transient, consensual, sexual intimacy is protected by the right of privacy." (Footnote omitted) (Emphasis supplied).
Id.
Because isolated phrases from Eisenstadt v. Baird are frequently lifted out of context, it is important to get a careful handle on precisely what Eisenstadt v. Baird has held.[2] It is not primarily a due process case at all, although it does stand for the proposition that the decision of whether to beget a child is part of the fundamental right to privacy and that any statute abridging it must be in furtherance of a compelling state interest. Eisenstadt v. Baird is primarily an equal protection case. It strongly suggests that if the purpose of the law were to discourage sexual relations outside of marriage, a legislative discrimination between married persons and unmarried persons would be a rational one and would not offend the equal protection clause. If, on the other hand, the purpose of the statute were to discourage contraception, per se, then it would be irrational for the Legislature to decide that an unmarried woman had less of an interest in avoiding pregnancy than a married woman might have. Such an irrational discrimination would offend the equal protection clause.
That reading of Eisenstadt v. Baird does not remotely help the appellant here, who claims a right to engage in unmarried sodomy, not a right to use contraception to avoid unwanted pregnancy.
The most sweeping application of the newly recognized right of privacy came eight years after its first recognition. Roe v. Wade, 410 U.S. 113, 93 S. Ct. 705, 35 L. Ed. 2d 147 (1973), held that a woman (in that case an unmarried woman) had, as an aspect of the right of privacy, the constitutional right to choose whether to continue or to abort a pregnancy. The Roe v. Wade opinion sheds little additional light on the issue before us. After tracing the development of the right of privacy, it catalogued those areas to which the right had been extended. Autonomy in the matter of sexual behavior (except implicitly within the intimacy of the marital union) was not remotely one of them:
"These decisions make it clear that only personal rights that can be deemed `fundamental' or `implicit in the concept of ordered liberty,' ... are included in this guarantee of personal privacy. They also make it clear that the right has some extension to activities relating to marriage ...; procreation...; contraception ...; family relationships . ..; and child rearing and education." (Citations omitted).
410 U.S. at 152-153, 93 S. Ct. at 726.
The next development came four years after Roe v. Wade. Carey v. Population Services Int'l, 431 U.S. 678, 97 S. Ct. 2010, 52 L. Ed. 2d 675 (1977), held simply that the combination of Griswold and Eisenstadt v. Baird guaranteed access by adults to contraceptives and that a New York law forbidding anyone but a licensed pharmacist to distribute contraceptives was an unconstitutional infringement on that right. Referring to Griswold and Eisenstadt v. Baird, the Court summarized their combined effect:
"[T]he underlying premise of those decisions [is] that the Constitution protects `the right of the individual ... to be free from unwarranted governmental intrusion into ... the decision whether to bear or beget a child.'" (Emphasis supplied).
431 U.S. at 687, 97 S. Ct. at 2017. Although Griswold spoke of "marital bedrooms," Carey reasoned, "subsequent decisions have made clear that the constitutional protection of individual autonomy in matters of childbearing is not dependent on that element." (Emphasis supplied). Id. Eisenstadt v. Baird, extending constitutional protection in that regard to unmarried persons, "characterized the protected right as the `decision whether to bear or beget a child.'" Id.
Far from creating a wide-ranging right of autonomy in matters of sexual behavior generally, the statement of the right is a narrow one:
"Read in light of its progeny, the teaching of Griswold is that the Constitution protects individual decisions in matters of childbearing from unjustified intrusion by the State."
Id.
The Supreme Court began mapping out the line beyond which the constitutional right of privacy would not reach, in Doe v. Commonwealth's Attorney for City of Richmond, 425 U.S. 901, 96 S. Ct. 1489, 47 L. Ed. 2d 751 (1976). That was a summary affirmance, without opinion, of a decision by a three-judge panel of the United States District Court for the Eastern District of Virginia in Doe v. Commonwealth's Attorney for City of Richmond, 403 F. Supp. 1199 (1975). For the precedential significance of a summary affirmance, see Hicks v. Miranda, 422 U.S. 332, 344, 95 S. Ct. 2281, 45 L. Ed. 2d 223 (1975). And see Carey v. Population Services Int'l, 431 U.S. 678, 718 n. 2, 97 S. Ct. 2010, 2014 n. 2, 52 L. Ed. 2d 675, 705 n. 2 (1977) (Rehnquist, J., dissenting). Although an affirmance of the decision of the District Court does not necessarily imply the adoption of all of the District Court's reasoning, the opinion by Senior Circuit Judge Bryan is of persuasive interest.
The Virginia statute there under review combined those actions proscribed in Maryland both by the common law crime of sodomy and by Art. 27, § 554. The Code of Virginia, 1950, as amended, provided:
"§ 18.1-212. Crimes against nature. If any person shall carnally know in any manner any brute animal, or carnally know any male or female person by the anus or by or with the mouth, or voluntarily submit to such carnal knowledge, he or she shall be guilty of a felony and shall be confined in the penitentiary not less than one year nor more than three years."
The plaintiffs sought a declaratory judgment declaring the Virginia statute unconstitutional as applied to homosexual relations between consenting adult males in private. The District Court traced the development of the constitutional right to privacy and pointed out that it was something that had been erected around marriage, the sanctity of the home, and the nurture of family life. The homosexual plaintiffs there simply did not qualify under those guidelines:
"Precedents cited to us as contra rest exclusively on the precept that the Constitution condemns State legislation that trespasses upon the privacy of the incidents of marriage, upon the sanctity of the home, or upon the nurture of family life. This and only this concern has been the justification for nullification of State regulation in this area."
403 F. Supp. at 1200.
The District Court concluded that there was "no authoritative judicial bar to the proscription of homosexuality since it is obviously no portion of marriage, home or family life." Id. at 1202.
The District Court opinion reasoned that this entire subject matter is more appropriate for the legislative branch than for the judicial:
"If a State determines that punishment therefor, even when committed in the home, is appropriate in the promotion of morality and decency, it is not for the courts to say that the State is not free to do so. .. . In short, it is an inquiry addressable only to the State's Legislature." (Citations omitted).
Id. The opinion finally found that the longevity of the law testified to its legitimacy:
"Although a questionable law is not removed from question by the lapse of any prescriptive period, the longevity of the Virginia statute does testify to the State's interest and its legitimacy. It is not an upstart notion; it has ancestry going back to Judaic and Christian law. The immediate parentage may be readily traced to the Code of Virginia of 1792. All the while the law has been kept alive, as evidenced by periodic amendments, the last in the 1968 Acts of the General Assembly of Virginia." (Footnotes omitted).
Id. at 1202-1203. That was the decision which the Supreme Court summarily affirmed.
What was strongly suggested by Doe v. Commonwealth's Attorney was explicitly stated by Bowers v. Hardwick, 478 U.S. 186, 106 S. Ct. 2841, 92 L. Ed. 2d 140 (1986). Involved was a Georgia anti-sodomy statute that paralleled almost exactly the Virginia anti-sodomy statute under review in Doe v. Commonwealth's Attorney. A declaratory judgment was sought that would declare the statute unconstitutional as applied to consenting adult male homosexuals in the privacy of the home. The United States Court of Appeals for the Eleventh Circuit granted the declaratory judgment, relying on the right to privacy developed in Griswold, Eisenstadt v. Baird, Stanley v. Georgia, and Roe v. Wade. 760 F.2d 1202 (11th Cir.1985). The Supreme Court reversed the Eleventh Circuit. The question to be considered was:
"The issue presented is whether the Federal Constitution confers a fundamental right upon homosexuals to engage in sodomy and hence invalidates the laws of the many States that still make such conduct illegal and have done so for a very long time. The case also calls for some judgment about the limits of the Court's role in carrying out its constitutional mandate."
478 U.S. at 190, 106 S. Ct. at 2843, 92 L.Ed.2d at 145. The applicability of the anti-sodomy law to heterosexuals, married or unmarried, was not considered by the Court:
"The only claim properly before the Court, therefore, is Hardwick's challenge to the Georgia statute as applied to consensual homosexual sodomy. We express no opinion on the constitutionality of the Georgia statute as applied to other acts of sodomy."
Id. 478 U.S. at 188 n. 2, 106 S. Ct. at 2842 n. 2, 92 L. Ed. 2d at 144 n. 2.
The reasoning of the Court, as to why Griswold's right to privacy would not apply to homosexual couples, however, would apply, point by point, with indistinguishable validity at least as far as unmarried heterosexuals are concerned. The failure of homosexuals to qualify for constitutional protection certainly did not seem to be based upon any moral value judgment in favor of heterosexuality over homosexuality. The decision either exempted everyone from coverage or, at most, was based upon the limited coverage of the right to privacy, which would appear to embrace sexual intimacy within marriage but not outside of marriage, regardless of whether the extramarital intimacy were heterosexual or homosexual. The Court catalogued the limited subject matter covered by the right to privacy, a catalogue that would seem to have no more place for unmarried heterosexuals than for homosexuals:
"We first register our disagreement with the Court of Appeals and with respondent that the Court's prior cases have construed the Constitution to confer a right of privacy that extends to homosexual sodomy and for all intents and purposes have decided this case. The reach of this line of cases was sketched in Carey v. Population Services International.... Pierce v. Society of Sisters ... and Meyer v. Nebraska ... were described as dealing with child rearing and education; Prince v. Massachusetts [321 U.S. 158, 64 S. Ct. 438, 88 L. Ed. 645 (1944)] ... with family relationships; Skinner v. Oklahoma ex rel. Williamson [316 U.S. 535, 62 S. Ct. 1110, 86 L. Ed. 1655 (1942)], ... with procreation; Loving v. Virginia, ... with marriage; Griswold v. Connecticut, supra, and Eisenstadt v. Baird, supra, with contraception; and Roe v. Wade, ... with abortion. The latter three cases were interpreted as construing the Due Process Clause of the Fourteenth Amendment to confer a fundamental individual right to decide whether or not to beget or bear a child. Carey v. Population Services International." (Citations omitted).
Id. 478 U.S. at 190-91, 106 S. Ct. at 2843-44, 92 L.Ed.2d at 145-146. The Court pointed out that none of those situations "bears any resemblance" to homosexual acts of sodomy. Neither, we note, do those situations "bear any resemblance" to unmarried heterosexual acts of sodomy:
"Accepting the decisions in these cases and the above description of them, we think it evident that none of the rights announced in those cases bears any resemblance to the claimed constitutional right of homosexuals to engage in acts of sodomy that is asserted in this case. No connection between family, marriage, or procreation on the one hand and homosexual activity on the other has been demonstrated, either by the Court of Appeals or by respondent."
Id. 478 U.S. at 190-91, 106 S.Ct. at 2844, 92 L. Ed. 2d at 146.
The Court went on to reject any more general claim that "any kind of private sexual conduct between consenting adults" is constitutionally protected. It cited the disclaimer, twice repeated, in Carey v. Population Services Int'l that adult sexual relations of any kind, heterosexual or homosexual, were constitutionally protected:
"Moreover, any claim that these cases nevertheless stand for the proposition that any kind of private sexual conduct between consenting adults is constitutionally insulated from state proscription is unsupportable. Indeed, the Court's opinion in Carey twice asserted that the privacy right, which the Griswold line of cases found to be one of the protections provided by the Due Process Clause, did not reach so far. 431 U.S., at 688, n. 5, 694, n. 17, 97 S. Ct. 2010 [at 2018 n. 5, 2021, n. 17], 52 L. Ed. 2d 675."
Id.
In dissent, Justice Stevens, although ruing the result, insisted that the majority's rationale unquestionably covered heterosexuals as well as homosexuals:
"[T]he rationale of the Court's opinion applies equally to the prohibited conduct regardless of whether the parties who engage in it are married or unmarried, or are of the same or different sexes." (Footnote omitted).
Id. 478 U.S. at 214, 106 S. Ct. at 2856, 92 L.Ed.2d at 161 (Stevens, J., dissenting).
The most painstaking scrutiny of every word the Supreme Court has written on the subject of the constitutional right to privacy does not yield any evidence that that right covers the type of activity before us in this case. That right covers the intimacy of the marital union; parental decisions dealing with raising and educating children; and decisions dealing with procreation, contraception, and abortion. There is not the remotest allusion to any constitutional protection for sexual activity orthodox or unorthodox, heterosexual or homosexual at least outside of marriage. Before we overturn a presumptively valid legislative action on the ground that it violates an ostensible constitutional protection, there must be some affirmative evidence that such a constitutional protection exists. We have found none.
Explicit Disclaimers of Coverage
If the total absence of any affirmative evidence for the existence of such a right were not foreclosing enough, there have been numerous and repeated disclaimers by many of the justices of the Supreme Court with respect to any coverage of sexual activity, at least of a non-marital variety.
In his dissenting opinion in Poe v. Ullman, Justice Harlan, while recognizing the right to privacy as the constitutional shield that keeps the marital union inviolate from governmental intrusion, placed his imprimatur upon laws forbidding adultery, fornication, and homosexual practices:
"The laws regarding marriage which provide both when the sexual powers may be used and the legal and societal context in which children are born and brought up, as well as laws forbidding adultery, fornication and homosexual practices which express the negative of the proposition, confining sexuality to lawful marriage, form a pattern so deeply pressed into the substance of our social life that any Constitutional doctrine in this area must build upon that basis."
367 U.S. at 546, 81 S. Ct. at 1778 (Harlan, J., dissenting). Indeed, the heart of his opinion was the contrast between the sacrosanct marital relationship and other sexual intimacies which the State was at liberty to forbid:
"Adultery, homosexuality and the like are sexual intimacies which the State forbids altogether, but the intimacy of husband and wife is necessarily an essential and accepted feature of the institution of marriage.... It is one thing when the State exerts its power either to forbid extra-marital sexuality altogether, or to say who may marry, but it is quite another when, having acknowledged a marriage and the intimacies inherent in it, it undertakes to regulate by means of the criminal law the details of that intimacy."
Id. at 553, 81 S. Ct. at 1782.
In Griswold v. Connecticut, the concurring opinion of Justice Goldberg, joined by Chief Justice Warren and Justice Brennan, was equally emphatic that the newly recognized constitutional right to privacy in no way cast doubt upon the legitimacy of laws against adultery, fornication, or sexual promiscuity and misconduct:
"The State of Connecticut does have statutes, the constitutionality of which is beyond doubt, which prohibit adultery and fornication.... These statutes demonstrate that means for achieving the same basic purpose of protecting marital fidelity are available to Connecticut without the need to `invade the area of protected freedoms.' ...
Finally, it should be said of the Court's holding today that it in no way interferes with a State's proper regulation of sexual promiscuity or misconduct." (Citations omitted) (Emphasis supplied).
381 U.S. at 498-499, 85 S. Ct. at 1689 (Goldberg, J., concurring). The concurring opinion then quoted with approval that part of Justice Harlan's Poe v. Ullman dissent which explicitly exempted from the constitutional protection, both adultery and homosexuality.
Justice White's concurring opinion found the Connecticut anti-contraception statute to be unconstitutional "as applied to married couples," but acknowledged the legitimacy of laws regulating sexual behavior outside of marriage:
"[T]he statute is said to serve the State's policy against all forms of promiscuous or illicit sexual relationships, be they premarital or extramarital, concededly a permissible and legitimate legislative goal." (Emphasis supplied).
381 U.S. at 505, 85 S. Ct. at 1693 (White, J., concurring). Justice Harlan concurred that the Connecticut statute was an unconstitutional infringement of the right to privacy "[f]or reasons stated at length in my dissenting opinion in Poe v. Ullman." 381 U.S. at 500, 85 S.Ct. at 1690 (Harlan, J., concurring).
In Eisenstadt v. Baird, the Supreme Court found that the purpose of the Massachusetts anti-contraception law before it was to inhibit contraception as contraception. In terms of that purpose, it found the Massachusetts distinction between married persons and unmarried persons to be an invidious discrimination within the contemplation of the equal protection clause. The plurality opinion of Justice Brennan, joined by Justices Douglas, Stewart, and Marshall, held that if the deterrence of pre-marital sex had been the purpose of the statute, the statute would not have offended the equal protection clause (or, presumably, the due process clause either):
"Conceding that the State could, consistently with the Equal Protection Clause, regard the problems of extra-marital and premarital sexual relations as `[e]vils ... of different dimensions and proportions, requiring different remedies,' ... we cannot agree that the deterrence of premarital sex may reasonably be regarded as the purpose of the Massachusetts law." (Citation omitted).
405 U.S. at 448, 92 S. Ct. at 1035.
Even with respect to orthodox sexual behavior (vaginal intercourse), the Supreme Court in Carey v. Population Services Int'l, explicitly disclaimed any suggestion that it had been brought within the coverage of the constitutional right to privacy. The opinion for the Court of Justice Brennan, joined in this regard by Justices Stewart, Marshall, and Blackmun, stated:
"[W]e do not hold that state regulation must meet this [the compelling state interest] standard `whenever it implicates sexual freedom,' ... or `affect[s] adult sexual relations,' ... but only when it `burden[s] an individual's right to decide to prevent conception or terminate pregnancy by substantially limiting access to the means of effectuating that decision.'" (Citations omitted). (Emphasis supplied).
431 U.S. at 688 n. 5, 97 S. Ct. at 2018 n. 5. As to the significance of this note, see Neville v. State, 290 Md. 364, 374 n. 7, 430 A.2d 570 (1981).
As Justice White emphasized in his concurring opinion, the Supreme Court has not cast the net of constitutional protection even over orthodox sexual relations outside of marriage, let alone over acts of homosexual or heterosexual sodomy:
"I do not regard the opinion, however, as declaring unconstitutional any state law forbidding extramarital sexual relations. On this assumption I join Part III.
... Again, however, the legality of state laws forbidding premarital intercourse is not at issue here."
431 U.S. at 702, 97 S. Ct. at 2025 (White, J., concurring). The concurring opinion of Justice Powell emphasized that an extension of the right to privacy "to all personal decisions in matters of sex is neither required by the Constitution nor supported by our prior decisions." 431 U.S. at 703, 97 S.Ct. at 2026 (Powell, J., concurring). In dissent, moreover, Justice Rehnquist stated unequivocally:
"While we have not ruled on every conceivable regulation affecting such conduct the facial constitutional validity of criminal statutes prohibiting certain consensual acts has been `definitively' established."
431 U.S. at 718 n. 2, 97 S. Ct. at 2033 n. 2 (Rehnquist, J., dissenting).
The argument, made by the appellant here, that the Supreme Court has created or recognized a constitutional right of privacy for consensual, adult, heterosexual fellatio simply cannot stand against these explicit and repeated disclaimers of ever having done any such thing.
Although all of the above disclaimers were by way of dicta, nine such disclaimers, subscribed to by no less than eleven Supreme Court justices, represent abundant circumstantial evidence of Supreme Court thinking on the subject. Added to that, of course, have been the square holdings in Doe v. Commonwealth's Attorney for City of Richmond (representing the vote of six justices; three others would have noted probable jurisdiction and set the case for oral argument) and Bowers v. Hardwick. Both of those decisions held that the Constitutional right to privacy did not extend to adult, consensual homosexual acts even in the privacy of the bedroom. Bowers v. Hardwick, moreover, cited the disclaimer, twice repeated, in Carey v. Population Services Int'l, that adult sexual relations of any kind, heterosexual or homosexual, were constitutionally protected:
"Moreover, any claim that these cases nevertheless stand for the proposition that any kind of private sexual conduct between consenting adults is constitutionally insulated from state proscription is unsupportable. Indeed, the Court's opinion in Carey twice asserted that the privacy right, which the Griswold line of cases found to be one of the protections provided by the Due Process Clause, did not reach so far. 431 U.S., at 688, n. 5, 694, n. 17, 97 S. Ct. 2010 [at 2018 n. 5, 2021, n. 7], 52 L. Ed. 2d 675."
478 U.S. at 191, 106 S. Ct. at 2844, 92 L.Ed.2d at 146.
Indeed, the final statement by the Supreme Court in Bowers v. Hardwick would seem to sustain anti-sodomy laws generally. The Supreme Court held that legislative regulation of sexual behavior based upon the legislature's reading of the prevailing morality of its electorate would pass the "rational basis" test of constitutionality:
"[R]espondent asserts that there must be a rational basis for the law and that there is none in this case other than the presumed belief of a majority of the electorate in Georgia that homosexual sodomy is immoral and unacceptable. This is said to be an inadequate rationale to support the law. The law, however, is constantly based on notions of morality, and if all laws representing essentially moral choices are to be invalidated under the Due Process Clause, the courts will be very busy indeed. Even respondent makes no such claim, but insists that majority sentiments about the morality of homosexuality should be declared inadequate. We do not agree, and are unpersuaded that the sodomy laws of some 25 States should be invalidated on this basis." (Footnote omitted).
478 U.S. at 196, 106 S. Ct. at 2846, 92 L.Ed.2d at 149. The sodomy laws of those 25 states referred to make no distinction between homosexual sodomy and heterosexual sodomy. Maryland, moreover, is one of those 25 states.
There is a real question as to whether the statements made by the Supreme Court about the almost sacrosanct intimacy of the marital union might compel a holding that there is a constitutional right to privacy with respect to any sexual activity engaged in by a married couple. There has, of course, never been a holding in that regard and that issue is not before us in this case.
There is no indication that the Supreme Court has drawn or is about to draw any line between heterosexuality and homosexuality in terms of the possible coverage of the privacy right. In the absence of any indication from the Supreme Court that a statute such as our Art. 27, § 554, at least as applied to unmarried persons, is unconstitutional and in view of numerous indications that such a statute, so applied, is constitutional, we conclude that Judge Raker, in making her ruling upon this issue, was not in error.
Our Own Prior Rulings
Our holding today is fully consistent with the approach we have taken to the constitutionality of § 554 on earlier occasions.
As recently as 1976, we had a factually indistinguishable situation before us in Gooch v. State, 34 Md. App. 331, 367 A.2d 90 (1976). There, as here, the defendant was charged with violent rape as well as with a perverted sexual practice. There, as here, the defendant acknowledged that, inter alia, an act of fellatio took place but claimed that it was fully consensual on the part of both parties. There, as here, the defendant requested an instruction that consent was a valid defense. There, as here, the instruction was denied. In affirming the conviction, Judge Liss said for this Court, at 34 Md. App. 338, 367 A.2d 90:
"The distinction to be made between the several counts may be found in the testimony of the accused: in the rape and handgun charges, he denied the commission of these crimes; in the perverted practice charge, he made what amounted to a judicial confession.
Section 554, of Article 27 of the Annotated Code of Maryland (1957, 1976 Repl.Vol.) makes it a violation of the criminal law of Maryland to place one's sexual organ in the mouth of any other person. It is immaterial whether the act is a voluntary or involuntary one. See, Hughes v. State, 14 Md. App. 497, 287 A.2d 299 (1972). The accused in his own defense testified that the prosecutrix had taken his penis into her mouth. The statement of the accused voluntarily made in open court without any compulsion, threats, promises or other vitiating factor was a binding admission that he had violated the above criminal statute. See, Brumit v. Florida, 220 So. 2d 659 (Fla.App., 1969); State v. Snell, 177 Neb. 396, 128 N.W.2d 823 (1964); McCormick, Evidence, Sec. 160 (1972)."
In Hughes v. State, 14 Md. App. 497, 287 A.2d 299 (1972), this Court held that a defendant lacked standing to challenge the constitutionality of § 554 on grounds of overbreadth. The claim was that the statute infringed upon a constitutional right of privacy concerning their sexual acts with respect to 1) consenting married adults and 2) consenting unmarried adults. Since that case involved a forbidden sexual act with a minor, we held that Hughes lacked the standing to challenge the constitutionality of the act as it might apply to others differently situated. Judge Orth, speaking for this Court, then went on, however, to observe, at 14 Md. App. 503, 287 A.2d 299:
"Nothing we have said in determining that Hughes had no standing to contest the constitutionality of the statute is to be construed as implying that we believe that the statute is unconstitutional as to adults, married or unmarried, consenting to the acts proscribed."
Indeed, after a thorough analysis of the Griswold case and its progeny, Judge Orth went on to comment, at 14 Md. App. 505-506, 287 A.2d 299:
"While Griswold may not expressly foreclose the application of its rule to unmarried adults, its rationale clearly does not lend itself to either a heterosexual or homosexual relationship between unmarried persons. The rationale of the Griswold holding flows from its eulogy of the marital status and lacking such status the rule has no foundation. In such circumstances we see no invidious discrimination between married individuals and unmarried individuals so as to deny equal protection of the laws in any event."
In Kelly v. State, 45 Md. App. 212, 412 A.2d 1274 (1980), aff'd sub nom. Neville v. State, 290 Md. 364, 430 A.2d 570 (1981), the precise issue was raised that is before us now. Kelly had been charged with abducting his victim at knifepoint, driving her to an abandoned missile site, raping her, and forcing her to engage in fellatio. He testified that the two of them had engaged in the charged sexual activities but that it had been consensual on the part of the young woman. The jury there, as here, acquitted Kelly of all counts in which force or threat of force was an element. He was convicted, as was the appellant here, only of a sexual offense under § 554. He squarely raised the same constitutional challenge that is being raised here and relied upon the same line of Supreme Court decisions in arguing for an emerging right to privacy with respect to sexual behavior.[3] As against that challenge, we upheld the constitutionality of the Maryland statute. Judge Thompson said for this Court, at 45 Md. App. 217, 412 A.2d 1274:
"We are not persuaded to change the rule and invalidate a legislative prohibition against sodomy, in the absence of a clear lead from the Supreme Court of the United States or from the Court of Appeals of Maryland. We are especially reluctant to invalidate a crime of such ancient vintage. Sodomy was prohibited by Acts of 1793, Chapter 57, Sec. 10. See also Exodus 22:19, Leviticus 18:22-23, and Deuteronomy 23:17."
We would be hard-pressed to hold that Judge Raker was in error for indulging in the presumptive validity of an act of the Maryland Legislature (enacted in 1916 and deliberately reenacted as recently as 1976) and for following our square holdings in Gooch v. State, supra, and Kelly v. State, supra. In the course of holding her to be in error, moreover, we would be required to overrule both Gooch and Kelly. We decline to do so.
The only new development since we last considered this issue in 1980 hardly mandates our reversing our position. In Neville v. State, 290 Md. 364, 430 A.2d 570 (1981), the Court of Appeals upheld our decision in Kelly v. State on other grounds. It held that since the facts of Kelly did not show the prohibited sexual conduct to have taken place in private, Kelly lacked the standing to challenge the constitutionality of § 554 as applied to private consensual conduct. The Court of Appeals did no more than indicate that the question is still open as to the constitutionality of noncommercial, heterosexual and consensual sexual practices between adults when conducted in private.
The Examination of the Right to Privacy by the Court of Appeals
In contexts different from that now before us, the Court of Appeals twice explored the contours of the constitutional right to privacy and held that right to be limited in scope. In Doe v. Commander, Wheaton Police Dep't, 273 Md. 262, 272, 329 A.2d 35 (1974), it held that the right was not so broad as to compel the expungement of a record of arrest. After reviewing the Supreme Court cases from Griswold through Roe v. Wade, Chief Judge Murphy quoted with approval from Note, Privacy in the First Amendment, 82 Yale L.J. 1462, 1476 (1973):
"[I]t is also true that `the definitions of privacy which the Griswold approach offers are at best descriptions of a widely shared emotional attitude. Analytically, the reasoning of Griswold and Wade offers no guidance for separating what privacy is from what it is not; it offers no generalizable definition of the right it is used to protect. Indeed, the extreme breadth of the Griswold analysis has produced utmost caution in courts called on to apply it....'"
In Montgomery County v. Walsh, 274 Md. 502, 512-513, 336 A.2d 97 (1975), the Court of Appeals held that the right to privacy was not offended by a financial disclosure requirement. In analyzing the limited reach of the constitutional right, Chief Judge Murphy observed:
"The Supreme Court emphasized in Roe v. Wade, ... however, that only personal rights that can be deemed `fundamental' or `implicit in the concept of ordered liberty' are included in the constitutional guarantee of personal privacy.... If these pronouncements hint that the constitutional right of privacy is of limited scope and not to be lightly applied, Paris Adult Theatre I v. Slaton, ... makes it explicit.... It is thus clear that the Supreme Court has yet to extend the right to privacy much beyond the context of intimate relationships. It is not, therefore, coextensive with every intrusion actionable under the tort of invasion of privacy, nor does it protect rights merely `important' and not `fundamental.'" (Citations omitted).
In Neville v. State, 290 Md. 364, 430 A.2d 570 (1981), the Court of Appeals was faced with a factual and doctrinal situation virtually indistinguishable from that before us, except that the failure to demonstrate the element of privacy disentitled the appellants there to have the Court of Appeals reach the ultimate merits. Nonetheless, the thorough and scholarly opinion of Judge Rodowsky explored the constitutional merits at some length. After pointing out the two earlier conclusions of the Court of Appeals that it was "clear that the Supreme Court has yet to extend the right of privacy much beyond the context of intimate relationships," 290 Md. at 373, 430 A.2d 570, he went on to quote with approval the disclaimer from Roe v. Wade:
"Following a reference to the compelling state interest test for the justification of certain state regulation and to the requirement that such a regulation must be narrowly drawn to express only the legitimate state interests at stake, as those concepts were applied in Roe v. Wade, the Court inserted the following footnote:
Contrary to the suggestion advanced in Mr. Justice Powell's opinion, we do not hold that state regulation must meet this standard `whenever it implicates sexual freedom,' ... or `affect[s] adult sexual relations,' ... but only when it `burden[s] an individual's right to decide to prevent conception or terminate pregnancy by substantially limiting access to the means of effectuating that decision.'"
Id. at 373-374, 430 A.2d 570. The Court of Appeals noted that the Supreme Court "obviously took pains" to insert the above-quoted disclaimer in a footnote that spoke for a six-justice majority, duplicating an almost verbatim footnote from another part of Roe v. Wade that only commanded a plurality.
The Neville opinion went on to observe:
"We discerned that if `these pronouncements hint that the constitutional right of privacy is of limited scope and not to be lightly applied, Paris Adult Theatre I v. Slaton, ... makes it explicit.'" (Citation omitted).
Id. at 374, 430 A.2d 570.
In well-considered dicta, the conclusion of the Court that the right to privacy does not apply to § 554 was clear:
"It is clear from the foregoing review that there is no holding by the Supreme Court that the right of privacy applies to conduct of the type prohibited by Md. Code, Art. 27, § 554."
Id. at 377, 430 A.2d 570.
Updating the Law is a Legislative Function
It is urged upon us that there has been a massive sexual revolution in the last quarter of a century. In support of this argument, its proponents cite impressive sociological studies, by the Kinsey Institute and by Masters and Johnson and by others, to demonstrate that modes of sexual expression once thought to be "unnatural" or "perverted" are now part of the commonplace experience of a significant majority of Americans, married and unmarried, heterosexual and homosexual. All of this may well be true and we do not suggest for a moment that it is not. Our response, rather, is that such a "Brandeis brief" should be delivered to the Legislature and not to the Court. Unless we are to usurp the legislative function under the guise of a constitutional interpretation, we refer such basic policy decisions to the branch that is more competent to make them and is, furthermore, constitutionally authorized to make them. Our feeling is akin to that of the Supreme Court of Indiana in Dixon v. State, 256 Ind. 266, 268 N.E.2d 84, 86 (1971), which had urged upon it such empirical studies:
"We are equally unimpressed by the claim via Dr. Kinsey and others that the acts complained of in this case are widespread in acceptance. Though such might be a valid argument to make to the Indiana Legislature in an attempt to modify the existing laws, it is hardly an argument upon which this Court can justify a judicial decision."
The times may, indeed, be changing and there may be a pressing need to bring the law up to date. The proper method, however, was spelled out by the Supreme Court of Arkansas in Carter v. State, 255 Ark. 225, 500 S.W.2d 368, 371 (1973):
"If social changes have rendered our sodomy statutes unsuitable to the society in which we now live, we need not be concerned about the matter because there is a branch of our government within whose purview the making of appropriate adjustment and changes peculiarly lies."
The very facts put forth by the appellant to demonstrate that our sexual mores have undergone significant change and that the anti-sodomy laws have lost touch with contemporary community standards prove our point. Our point is that resort to the legislative branch is not only the proper avenue through which to bring about change but is a fully effective avenue, as well.
The movement for change began with the promulgation of the American Law Institute's Model Penal Code provision which decriminalized adult, consensual, private, sexual conduct. It is, of course, to be noted that the Model Penal Code is not a brief for an appellate court but a recommendation for legislative reform. The comment accompanying this provision of the Model Penal Code pointed out that in recent years such nations as France, Great Britain, Canada, Mexico, Italy, Denmark, and Sweden have all repealed their sodomy statutes. Model Penal Code, § 207.5, comment 276, at 278 (Tent.Draft. No. 9, 1955). Again, our point is made. All of those nations repealed their sodomy statutes through legislative action.
A major impetus to change in recent years was the famous Wolfenden Report, which in the 1960's recommended to the British Parliament the repeal of the sodomy statutes. Parliament initially considered the recommendation and rejected it. On the second try in 1967, however, Parliament eliminated the crime. Again, legislative action was fully effective in bringing about desired reform.
Following the recommendation of the Model Penal Code, Illinois repealed its sodomy law in 1961. Connecticut followed suit in 1969. During the decade of the 1970's, eighteen additional states Alaska, California, Colorado, Delaware, Hawaii, Indiana, Iowa, Maine, Nebraska, New Hampshire, New Jersey, Ohio, Oregon, Pennsylvania, South Dakota, Washington, West Virginia, and Wyoming followed the example of Illinois and Connecticut. Wisconsin decriminalized sodomy in 1982. What all of this demonstrates is that there is no impediment to legislative reform when the people of a sovereign state want such reform.
In the 1987 session of the Maryland General Assembly, Senate Bill 443 and House Bill 816 proposed the repeal of Article 27, §§ 553 and 554. Neither Bill was enacted into law. There is nothing, however, to preclude future efforts at repeal. If the citizens of Maryland want it, they will, through their popularly elected representatives, get it. The system works as it was designed to work. We don't need Platonic Elders looking over the shoulder of the Legislature.
In answer, therefore, to the appellant's claim that the anti-sodomy statutes do not reflect current community standards, we find prophetic the words of Justice Black in his dissenting opinion in Griswold v. Connecticut, back when all of this constitutional debate began:
"[W]e were told that the Connecticut law does not `conform to current community standards.' But it is not the function of this Court to decide cases on the basis of community standards. We are here to decide cases `agreeably to the Constitution and laws of the United States.' ... If, as I should surely hope, the law before us does not reflect the standards of the people of Connecticut, the people of Connecticut can freely exercise their true Ninth and Tenth Amendment rights to persuade their elected representatives to repeal it. That is the constitutional way to take this law off the books" (Footnote omitted).
381 U.S. at 530-531, 85 S. Ct. at 1707 (Black, J., dissenting).
Considerations at Sentencing
The appellant's second contention is that Judge Raker improperly considered, at the time of sentencing, evidence as to offenses of which the appellant had been acquitted. It suffices to say that we have read the transcript and find nothing improper about what Judge Raker considered or how she considered it.
Cruel and Unusual Punishment
Although the maximum sentence for a violation of Art. 27, § 554 is ten years, the appellant was sentenced to five years incarceration. That sentence was suspended and the appellant was placed on supervised probation for five years. The constitutional propriety of that sentence, pursuant to the Eighth Amendment and according to the guidelines of Solem v. Helm, 463 U.S. 277, 103 S. Ct. 3001, 77 L. Ed. 2d 637 (1983), would be a fascinating topic to explore more fully on some other occasion. For the moment, it is enough to note that we do not find it to have been in any way unconstitutional or otherwise improper.
JUDGMENT AFFIRMED; COSTS TO BE PAID BY APPELLANT.
WILNER, Judge, dissenting.
Steven Schochet was sentenced to five years in prison because, on the evening of October 3, 1986, he engaged in an act of fellatio with Dovie Sullivan. It seems apparent from this record that Mr. Schochet and Ms. Sullivan were competent adults, that the act occurred in the privacy of Ms. Sullivan's apartment, that they were alone at the time Ms. Sullivan's daughter being asleep in another room and that the act was part of a broader range of sexual conduct between the parties, including vaginal intercourse, that the jury implicitly found was freely and voluntarily engaged in by Ms. Sullivan.[1]
In a precise and scholarly Opinion, the panel majority sees nothing unconstitutional about Mr. Schochet being sentenced to prison for engaging in that act under that circumstance. I do.
There is much in Judge Moylan's Opinion with which I agree. I agree, for example, that:
(1) the United States Supreme Court has recently made clear (in a 5-4 decision) that there is no Federal Constitutional right to engage in homosexual conduct that is proscribed by State law;
(2) that Court has strongly implied, but never squarely held, that it would be an impermissible invasion of a Constitutionally protected right of privacy for the Legislature to criminalize this kind of activity when engaged in by a married couple in private, shielded from any reasonable prospect of public view; and
(3) neither the Supreme Court nor the Maryland Court of Appeals has yet given a clear, definitive indication of whether any such right of privacy applicable to married couples would also apply to a competent, adult, heterosexual, unmarried couple when engaging in this activity under similar circumstances.
There is, in other words, a lack of controlling precedent in this State clearly mandating one result or the other in this case.
The panel majority, recognizing this void, opts for affirmance, seemingly on two grounds: one, that the statute proscribing this conduct, even when undertaken by married couples, is presumptively valid; and two, unless and until the Supreme Court clearly directs otherwise, we ought not to overturn the statute but should defer instead to the Legislature.
I have no quarrel with either of those propositions, as general statements of principle. But they necessarily must yield to an even greater imperative. John Marshall expressed the point so well in Marbury v. Madison, 1 Cranch 137, 177-78, 5 L. Ed. 60, 73-74 (1803):
"It is emphatically the province and duty of the judicial department to say what the law is. Those who apply the rule to particular cases, must of necessity expound and interpret that rule. If two laws conflict with each other, the courts must decide on the operation of each.
So if a law be in opposition to the constitution; if both the law and the constitution apply to a particular case, so that the court must either decide that case conformably to the law, disregarding the constitution; or conformably to the constitution, disregarding the law; the court must determine which of these conflicting rules governs the case. This is of the very essence of judicial duty.
If, then, the courts are to regard the constitution, and the constitution is superior to any ordinary act of the legislature, the constitution, and not such ordinary act, must govern the case to which they both apply.
Those, then, who controvert the principle that the constitution is to be considered, in court, as a paramount law, are reduced to the necessity of maintaining that courts must close their eyes on the constitution, and see only the law.
This doctrine would subvert the very foundation of all written constitutions."
That authority that obligation is not limited to the Supreme Court. It is equally the duty of any court of competent jurisdiction and has been so regarded throughout most of our national history. We have never shied from declaring presumptively valid laws unconstitutional, when the conflict seems clear, merely because no higher court had previously done so. We look at the statute and we look at the Constitution, and, if the one appears to us to be repugnant to the other, we declare it so and give effect to the higher, controlling provision. We obviously may not exercise this authority capriciously; we are constrained to give due deference to the Legislature and to sustain its enactments unless their repugnancy to the Constitution is clear. But when that repugnancy is clear clear to us we have no choice, if we are to remain true to our own oaths of office, other than to strike down the offending enactment.
The majority recognizes that there is a Constitutionally-based right of privacy, notwithstanding the lack of any mention of such a right in the Constitution itself. The issue is whether this kind of activity falls within it. Judge Moylan reviews in depth and in some detail pronouncements from the Justices of the Supreme Court since Poe v. Ullman, concluding from some grand matrix of all their sayings that this activity is probably not protected, at least when carried on by unmarried couples. What the majority, in effect, has done is to take a frozen slice of Constitutional history, from 1965 to 1987, and to assume that this steadily emerging Constitutional principle will develop no further. That is a nice conservative view, but it is unrealistic, because it leaves a most fundamental legal principle in a state of absolute illogic.
The problem, essentially, is an analytical one; on what basis, by what standard, should the law decide which of the several kinds of intensely personal relationships, activity, and expression that people have or engage in is to be shielded from discretionary governmental intrusion and interference? The majority, following a sort of ad hoc development in the Supreme Court, parcels this out on the basis of whether the relationship, activity, or expression in question is included within this somewhat ill-defined and contourless zone of privacy. Inclusion means it is shielded; exclusion means it is not; it is a sort of "all or nothing" proposition. I suggest a somewhat different framework of analysis, one that finds equal support in Supreme Court case law.
My thesis, as it would apply in this case, is as follows. I believe (1) that there is a Constitutionally protected zone of privacy, ill-defined perhaps but nonetheless existing, that shields certain fundamental personal conduct and expression from substantial governmental interference; (2) that the conduct at issue here, when engaged in under the circumstances noted, falls within that zone of privacy; (3) that, although inclusion within this zone does not necessarily endow an activity with total immunity from governmental interference, it does require that the government show a strong and compelling justification for the interference; and (4) that no such showing has been made here.
Unlike the majority, I do not believe that the Constitutional right of privacy was born in 1965 or that its parents were Estelle Griswold and the State of Connecticut. It has antecedents in Socrates, Cicero, Rousseau, and Locke, among many others; it is given expression throughout the Declaration of Independence, and indeed the systematic violation of it by Parliament and its agents was a major cause of the Revolution. But even putting all that aside, the Supreme Court itself has seemingly recognized a more distant root. In Roe v. Wade, 410 U.S. 113, 152, 93 S. Ct. 705, 726, 35 L. Ed. 2d 147 (1973), the Court, through Justice Blackmun, observed that while "[t]he Constitution does not explicitly mention any right of privacy ... [i]n a line of decisions ... going back perhaps as far as Union Pacific R. Co. v. Botsford, 141 U.S. 250, 251, 11 S. Ct. 1000, 1001, 35 L. Ed. 734 (1891), the Court has recognized that a right of personal privacy, or a guarantee of certain areas or zones of privacy does exist under the Constitution."
In 1928, Justice Brandeis, repeating sentiments that he and Samuel D. Warren had expressed 38 years earlier, wrote:
"The makers of our Constitution undertook to secure conditions favorable to the pursuit of happiness. They recognized the significance of man's spiritual nature, of his feelings and of his intellect. They knew that only a part of the pain, pleasure and satisfactions of life are to be found in material things. They sought to protect Americans in their beliefs, their thoughts, their emotions and their sensations. They conferred, as against the Government, the right to be let alone the most comprehensive of rights and the right most valued by civilized man."
That passage, written in dissent in Olmstead v. United States, 277 U.S. 438, 478, 48 S. Ct. 564, 572, 72 L. Ed. 944 (1928), was quoted, verbatim, by the majority in Stanley v. Georgia, 394 U.S. 557, 564, 89 S. Ct. 1243, 1247-48, 22 L. Ed. 2d 542 (1969), for the proposition that "also fundamental is the right to be free, except in very limited circumstances, from unwanted governmental intrusions into one's privacy."
The majority, of course, does not deny the existence of this right of privacy. I delve a bit into its history only to illustrate that it was not something capriciously pulled out of the air by Justices Harlan and Douglas but has a much deeper meaning and tradition. That is significant, I suggest, in determining its scope.
I freely acknowledge that this right of privacy is not well defined; neither, of course, is "due process of law" or "unreasonable searches and seizures" or "cruel and unusual punishments." These are broad concepts that take their meaning not just from a frozen slice of history but from contemporary social mores and institutions. Changed perceptions of what is acceptable does have Constitutional significance. Public flogging was once permitted, as was hanging for felonies other than murder; it no longer is, Constitutionally. As Justice Frankfurter commented in National Mutual Ins. Co. v. Tidewater Transfer Co., 337 U.S. 582, 646, 69 S. Ct. 1173, 1195-96, 93 L. Ed. 1556 (1949) (in dissent): "Great concepts like ... `liberty' ... were purposely left to gather meaning from experience. For they relate to the whole domain of social and economic fact, and the statesmen who founded this Nation knew too well that only a stagnant society remains unchanged."
This notion would seem as applicable to public attitudes about sexual contact between men and women as to any other aspect of our social fabric.
Throughout history, the subject of sex i.e., sexual contact and intercourse has been shrouded in hushed tones and mystery, encrusted with ecclesiastical armor. The whole thrust of society, usually led by old men, has been to place barriers of one kind or another on the expression of this most basic function of all living things, including people. To the extent that these barriers were intended to promote, protect, exalt, and preserve the institution of marriage and with it the nuclear family, they obviously had a significant and useful societal, economic, and therefore political purpose and could reasonably be regarded as within the proper purview of government, even one founded upon notions of social contract, as ours was. But if and to the extent they have no such connection or cease to have any such connection, and simply regulate this kind of very personal conduct for no apparent reason, the question of authority is legitimately raised.
The Supreme Court has, I concede, moved haltingly in this area, and properly so. It is not a legislative body; nor is it a Constitutional Convention permanently in session. But it has recognized that certain aspects of sexual relations between men and women are immune from governmental intrusion, absent some compelling, rational basis for the intrusion. And despite the ardent wishes of the majority, the Court has not limited this protection to married couples, and it has not limited it merely to decisions regarding procreation. See Roe v. Wade, supra.
Justice Douglas asked in Griswold, "Would we allow the police to search the sacred precincts of marital bedrooms for telltale signs of the use of contraceptives?" and then answered the question, "The very idea is repulsive to the notions of privacy surrounding the marriage relationship." 381 U.S. at 485-86, 85 S.Ct. at 1682.[2] What makes intimate sexual contact between men and women less private because they are not married to one another? What makes the intrusion into the bedroom less repulsive because the occupants are not husband and wife? What makes it less repulsive if the object of the search is not contraceptives but the form of sexual expression?
Sexual activity involves a use of one's body and an expression of one's feelings, both of which have found at least limited protection in the Constitution. Whatever the perimeter or contours of the zone of privacy the fenced-in area from which a prying government should be largely excluded may be, I fail to see how this kind of conduct could not be regarded as included within it.
Under my thesis, that would not end the inquiry. The Court made clear in Roe v. Wade that rights of this type are not absolute or unqualified but "must be considered against important state interests in regulation." 410 U.S. at 154, 93 S.Ct. at 727. But, as the Court noted further, "[w]here certain `fundamental rights' are involved, the Court has held that regulation limiting these rights may be justified only by a `compelling state interest,' ... and that legislative enactments must be narrowly drawn to express only the legitimate state interests at stake." Id., 155, 93 S. Ct. at 728.
What are the State interests at stake here? None are mentioned by the majority. Is there a public health issue? None has been identified. Does this prohibition in any way protect, enhance, or preserve the institution of marriage or the family unit? We are not told how. Does the proscribed conduct cause or lead to disruptive or antisocial behavior or otherwise threaten public order? There is no such assertion. Does it interfere with other private rights deserving of protection? No such claim is made. Well, what then is the compelling State interest that justifies sentencing Mr. Schochet to prison?
The only ground asserted for this kind of criminal sanction is some vague notion of public morality, some unarticulated need to punish acts that the Legislature once regarded as "unnatural or perverted" and that the majority holds to be "unorthodox." So let us explore that for a moment. Public morality may be a valid basis for regulation. Bowers v. Hardwick, 478 U.S. 186, 106 S. Ct. 2841, 92 L. Ed. 2d 140 (1986). But there has to be some evidence of what that public morality is; the term itself cannot supply the fact.
The fact is that public morality, to the extent documented, condones rather than condemns this activity, and the degree of condonation has not only dramatically increased over the past 40 years but is approaching universality, at least among married couples. The conduct, in other words, is no longer regarded by the people as unnatural, or perverted, or unorthodox.[3]
The majority, apparently, views this as a matter for the Legislature alone to consider; but I submit that, if the only asserted basis for a criminal statute is a perception of public morality, it is a matter for the courts as well. To hold otherwise would be to allow the power, under the guise of protecting public morality, to impose criminal sanctions on masturbation and all variety of non-coital sexual contact, even down to kissing and hand-holding, when carried on by consenting adults in private. Would the majority commit that authority too to the State Legislature? If not, why not?
I think it clear that this law, as applied to adult, consenting, competent heterosexual couples who engage in this activity under the circumstances evident in this case, abridges fundamental liberties protected by the Constitution and is therefore, to that extent, invalid.[4] I am not alone in that view.[5]
As a final note, I would point out that, as the Constitutional right of privacy now seems clearly to rest upon the "due process" clauses of the Fifth and Fourteenth Amendments to the U.S. Constitution, it would, in this State, rest as well on Md. Declaration of Rights, art. 24, which has consistently been interpreted by the Court of Appeals as the equivalent of the Federal due process clauses. See Lodowski v. State, 307 Md. 233, 248-49, 513 A.2d 299 (1986). To avoid unduly alarming the panel majority, I hasten to add that, as Lodowski makes clear, art. 24 is no broader than the Federal due process rights, and I therefore do not suggest (and indeed would oppose) grounding this right solely on the State Constitution. The two provisions should continue to be regarded as synonymous. Thus, if the activity is protected under the Federal Constitution, as I believe it is, it is also protected under the State Constitution.
NOTES
[1] Justices Powell and Rehnquist, newly appointed to the Court, did not participate. Chief Justice Burger dissented.
Justices White and Blackmun concurred only in the result and explicitly dissociated themselves from the opinion of the Court. They pointed out that the Massachusetts Supreme Judicial Court, in affirming the conviction, had relied solely on the fact the defendant Baird was not a physician, a necessary precondition to distribute a contraceptive device to anyone, married or single. In shifting the focus from the distributor of the contraceptive device to the distributee, the federal Court of Appeals described the recipient of the device as "an unmarried adult woman." Justices White and Blackmun pointed out that there was nothing in the record about her marital status, one way or the other. Had she been married, that would have been, under the Court of Appeals rationale, a complete defense to the distribution under the statute. The two justices reasoned that Massachusetts, therefore, had failed to prove a necessary element of its case. That was a sufficient reason for Justices White and Blackmun to reverse the conviction and they declined, therefore, to consider any other constitutional issue.
Justice Douglas, who joined the plurality opinion but concurred separately, would have rested the decision on First Amendment grounds. He argued that handing a representative sample to a member of the audience at the conclusion of a lecture was no more than a visual or demonstrative aid to the lecture itself.
[2] This overreading has been noted by Comment, The Constitutionality of Sodomy Statutes, 45 Fordham L.Rev. 553, 575-576 (1976):
"These words have been interpreted as affirming a general right of privacy covering sexual conduct, irrespective of whether the parties are married. On the other hand, a more faithful reading of the Court's statement in Baird would indicate that the right referred to was the freedom to decide whether or not to have children. Indeed, in a later decision the Court confirmed this interpretation. Accordingly Baird did not recognize any broad right of privacy protecting sexual intimacies." (Footnotes omitted).
An analysis of the Baird Court's logic can also be found in Note, Legislative Purpose, Rationality, and Equal Protection, 82 Yale L.J. 123, 124-127 (1972).
[3] The appellant in Kelly, even as the appellant here, reasoned by analogy for an emerging right to privacy with respect to sexual conduct and relied upon the seminal Supreme Court decisions of Griswold v. Connecticut, 381 U.S. 479, 85 S. Ct. 1678, 14 L. Ed. 2d 510 (1965); Eisenstadt v. Baird, 405 U.S. 438, 92 S. Ct. 1029, 31 L. Ed. 2d 349 (1972); Roe v. Wade, 410 U.S. 113, 93 S. Ct. 705, 35 L. Ed. 2d 147 (1973); and Carey v. Population Services Int'l, 431 U.S. 678, 97 S. Ct. 2010, 52 L. Ed. 2d 675 (1977) the same line of cases relied upon by the appellant here.
[1] Technically, of course, the jury's verdicts establish no more than that it had a reasonable doubt (1) as to whether the alleged anal intercourse occurred at all and (2) whether any of the acts, other than the fellatio, were committed (i) with force and (ii) without Ms. Sullivan's consent. In terms of the issue before us, however, whether the jury simply entertained a reasonable doubt or affirmatively believed that Ms. Sullivan consented to whatever occurred is of little moment. No greater evidence of force or lack of consent was presented with respect to the fellatio than with respect to the other acts, and so one might quite reasonably suppose that, if the jury had been apprised that consent was a valid defense to the charge based on the fellatio, appellant would have been acquitted of that offense as well. Indeed, if one accepts Mr. Schochet's version of the event, as the jury apparently did, Ms. Sullivan actually instigated the act of fellatio.
[2] Some perhaps even Justice Douglas may have regarded this rhetorical exchange as a bit of hyperbole when written 23 years ago. Who indeed would envision the police snooping into marital bedrooms? See Ricks v. State, 312 Md. 11, 537 A.2d 612 (1988), where, two months ago, a unanimous Court of Appeals (affirming this Court) sustained the "non-consensual video surveillance by police of suspected illegal drug activities within a residential apartment in Baltimore City." Id., 13, 537 A.2d 612. Officers "entered the air ducts of the apartment through the roof, shaved away part of the dry wall and implanted a miniature camera, focused on the dining room of the apartment. After several weeks of observation and twenty-five hours of recorded video tape, a search warrant was issued to search the apartment...." (Emphasis added.) Id., 18, 537 A.2d 612. If the police can install a camera in the dining room, why not in the bedroom? The requisite probable cause is not all that hard to come by. The hyperbole, if that's what it was, has become a very real possibility.
[3] In his first report, Sexual Behavior in the Human Male (1948), Alfred Kinsey found that fewer than half of the men interviewed engaged in fellatio or cunnilingus, even during marriage. In the category of highest incidence married men with 13+ years of education 45.3% performed cunnilingus and 42.7% engaged in fellatio. Five years later, in his Sexual Behavior in the Human Female, Kinsey reported that 54% of the married women interviewed had engaged in pre-coital cunnilingus and 49% had engaged in fellatio. See also P. Gebhard and A. Johnson, The Kinsey Data (1979). In their 1977 Redbook Report on Female Sexuality, C. Tavris and S. Sadd found that 93% of wives responding reported having engaged in cunnilingus and 91% had engaged in fellatio. They concluded from this response that, "Today it is clear that if the sexual revolution has occurred anywhere, it is in the practice and acceptance of oral sex. Among people under age twenty-five, it is virtually a universal part of the sexual relationship."
P. Blumstein and P. Schwartz have reported similar statistics 93% of heterosexual couples had engaged in cunnilingus and 90% had engaged in fellatio. See also W. Masters, V. Johnson, and R. Kolodny, Human Sexuality 393 (1985). Nor is this phenomenon confined to the young. E. Brecher reports in Love, Sex, and Aging 358-59 (1984), that, among people over 50, 49% of women and 56% of men engaged in cunnilingus and 43% of women and 49% of men engaged in fellatio.
[4] One of the interesting and unique things about the crime, as stated in § 554 is that, when committed in the manner noted here, it is not only "victimless," but the would-be victim is equally guilty of the offense. Whoever places or takes into his or her mouth the sexual organ of another person is guilty. Given the jury verdict in this case, one might wonder why Ms. Sullivan was not also charged with the offense.
[5] See People v. Onofre, 415 N.E.2d 936 (N.Y. 1980), cert. denied 451 U.S. 987, 101 S. Ct. 2323, 68 L. Ed. 2d 845 (1981); State v. Pilcher, 242 N.W.2d 348 (Iowa 1976); Post v. State, 715 P.2d 1105 (Okla. Crim. App.), cert. denied ___ U.S. ___, 107 S. Ct. 290, 93 L. Ed. 2d 264 (1986); Commonwealth v. Balthazar, 366 Mass. 298, 318 N.E.2d 478 (1974); Commonwealth v. Reilly, 5 Mass. App. 435, 363 N.E.2d 1126 (1977); State v. Hill, 166 N.J. Super. 224, 399 A.2d 667 (1978), rev'd on other grounds 170 N.J. Super. 485, 406 A.2d 1334 (App.Div. 1979). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543276/ | 997 A.2d 1180 (2010)
ORTEGA
v.
PENNSYLVANIA BD. OF PROBATION AND PAROLE.
No. 128 MAL (2010).
Supreme Court of Pennsylvania.
June 21, 2010.
Disposition of Petition for Allowance of Appeal Denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543260/ | 39 F.2d 228 (1930)
UNITED STATES GYPSUM CO.
v.
HESLOP et al.
No. 171.
District Court, N. D. Iowa, Central Division.
March 25, 1930.
Helsell, McCall & Dolliver, of Ft. Dodge, Iowa, and Scott, Bancroft, Martin & MacLeish, of Chicago, Ill., for plaintiff.
John M. Schaupp, Jr., of Ft. Dodge, Iowa, for defendants.
SCOTT, District Judge.
A suit in equity by United States Gypsum Company, an Illinois corporation, against John Heslop, Fred W. Knigge, John Maddox, William Carlson, Joseph Hayes, E. D. Russell, Gypsum Mill Workers' Union No. 141, and Gypsum Miners' Union No. 158, citizens of Iowa and residents of Ft. Dodge in said state, for an injunction restraining defendants from conspiring together to injure plaintiff's interstate business and to prevent plaintiff from operating its mine and mill at Ft. Dodge, Iowa, on an open shop basis; from publishing and circulating printed and written statements to the effect that plaintiff is or has been declared unfair to organized labor, and that a strike originating in 1921 at plaintiff's mill at Ft. Dodge is still in force; that plaintiff employs convict labor, and employs its labor under "yellow dog" contract; and for a preliminary injunction and temporary restraining order.
Upon issue joined and after hearing, a preliminary injunction issued and remained in force until final hearing. The cause was tried and submitted upon testimony taken in the form of depositions and other testimony taken in open court. From the admitted facts and undisputed testimony it appears:
That United States Gypsum Company, an Illinois corporation, has for many years engaged in manufacturing and selling gypsum products, such as plaster, wall board, building block, and roof tile. That plaintiff has a quarry or mine and mill at Ft. Dodge, Iowa, and also mills located in New York, Oklahoma, Virginia, and other states, from which mills shipments are made to every state in the Union. The products of the Ft. Dodge mine and mill are shipped into twenty-five to thirty states. The products of the company are principally used in the erection and repairing of buildings and structures, and are sold at points in the various states to dealers, who in turn sell to contractors and builders. The plaintiff's products all contain, either on the product itself or the container thereof, the name of the company in addition to the trade-mark of the particular product. Such name and trade-mark remains on the product or container until used in construction and easily identifies the same. Approximately 90 per cent. of the products sold by plaintiff are erected or used by union labor.
Plaintiff's mine and mill at Ft. Dodge, Iowa, for a period prior to 1921 was operated *229 upon the so-called closed shop or union basis. At Ft. Dodge, there were two labor unions existing and concerned prior to 1921, viz., Gypsum Mill Workers' Union No. 141, and Gypsum Miners' Union No. 142, and during the period of the World War wages increased very greatly. The contracts with the unions expired on June 30, 1921. In March, 1921, plaintiff suggested to the two unions a continuance of the contract for a period of eighteen months at a materially reduced wage scale. Neither party has made the record very clear as to the negotiations between March and June, but it is quite evident that the men were opposed to any reduction in wages, and no agreement was arrived at. A few days before June 30, 1921, the company announced by published and posted notices a new wage scale, and that the company would operate on an open shop basis after June 30th. On July 1, 1921, the members of the two unions declared and put into effect a strike which continued for a number of weeks. By September, however, approximately from 90 to 95 per cent. of the striking workmen had returned to work on the adjusted scale of wages and under the open shop plan or basis. The plaintiff's mine and mill continued to operate on the open shop basis over the succeeding eight years and until the time of the trial, and presumably are still so operating. Since September, 1921, there has been no controversy between the plaintiff and its workmen, either over wages or conditions of employment. There are four other gypsum concerns at Ft. Dodge, owning and operating mines and mills and engaged in interstate commerce in competition with the plaintiff. All of these other mills and mines are, and since 1921 have been, operated on an open shop plan or basis, commonly called the American plan.
During the summer of 1925, Gypsum Mill Workers' Union No. 141 surrendered its charter, and Gypsum Miners' Union No. 142 has also ceased to exist.
Defendant John Heslop, at the time of the strike in 1921, was an employee of plaintiff, engaged as repair man in the mill, but was not a regular millwright. Heslop did not return to work, and has not since 1921 been employed by plaintiff or any other gypsum industry. None of the other defendants have been employed by plaintiff or any other gypsum concern since 1921, with the exception of defendant Maddox, who was an employee of plaintiff for some time during the year 1926, but who ceased to be employed during that year. None of the defendants have since 1921 sought employment from plaintiff, and defendant Heslop testifies that he would not accept employment under the open shop plan, but that he would seek employment under the closed shop plan. The defendant Russell is a practicing physician and never has been employed by the plaintiff or any other gypsum concern, and his connection with the case grows out of his intimacy with defendant Heslop.
During the months of May and June, 1926, defendant Heslop and a few others organized and procured a charter to Gypsum Miners' and Mill Workers' Union No. 158. All of these unions exist under charters from the International Union of Mine, Mill and Smelter Workers affiliated with the American Federation of Labor. Union No. 158, organized by Heslop and others in June, 1926, seems to have been used exclusively for propaganda purposes. No member of the union is in the employ of the plaintiff nor of any other gypsum company at Ft. Dodge, so far as appears from the record, and its membership is confined to a few individuals, none of which are in any way engaged in the gypsum industry.
The individual defendants, with the exception of Dr. Russell, beginning with the month of September, 1923, at intervals up to and including 1928, have published and distributed a series of circulars addressed "To All Central Trades Councils, Building Trades Councils, and State Federations of Labor," charging in substance that plaintiff is unfair to organized labor and asking that the contents of the circulars be published. The exact wording of the various circulars varied. The circulars of September 5, 1923, charged that the plaintiff and four other gypsum companies located at Ft. Dodge who manufactured "Universal Hair Fibered Plaster, Plymouth Cement Plaster Fibered, Plymouth Cement Plaster, unfibered, Plymouth Wood Fiber Plaster, Plymouth Stucco, Plymouth Molding Plaster, Plymouth Wood Fiber No. 20, Acolite Wood Fiber Plaster, Re-ground Stucco, Acolite Cement Plaster, Iowana Cement Plaster fibered, Plymouth Cement Plaster Double Fibered, are unfair to Organized Labor." That these companies started an open shop fight on July 1, 1921, and that they are running nonunion mills, and asked co-operation in advertising the fact that these corporations are unfair and that the strike is indorsed by the Ft. Dodge Trades and Labor Assembly. At the foot of this circular is printed, "Fort Dodge Trades and Labor Assembly," and with the seal *230 thereof. This circular may be said to have had the approval of the Ft. Dodge Trades and Labor Assembly. The testimony shows, however, that no other circular had the approval of that body. At the head of this circular, as at the head of all others, except the last, in large type were the words, "Watch These Materials." The last circular of May, 1928, had the words, "Continue to Watch These Materials." The circular of June 16, 1924, addressed as before, named only the United States Gypsum Company, plaintiff, recited the various products manufactured by that company, that on July 1, 1921, it started a fight for open shop, that it is unfair to organized labor, and that "the strike of the Gypsum Mill Workers' Union and the International Union of Mine, Mill and Smelter Workers is indorsed by the Fort Dodge Trades and Labor Assembly," and asks publications favorable to organized labor to publish the circular. This circular is signed, John Heslop, President Mill Workers, and bears the seal of Gypsum Mill Workers' Union No. 141. Another circular substantially identical was published and sent out under date of November 16, 1924. Another circular substantially identical, but in addition bearing an alleged copy of a contract headed, "Open Shop or American Plan," and referred to in the record as the "yellow dog" contract. Under date of November 25, 1925, another circular was sent in somewhat different language, and as follows:
"The United States Gypsum Co., manufacturing the following gypsum products, Plasterboard, prybar building blocks, domes, rooftile, wood fibre plaster, hair plaster, sand finish and other gypsum products and they are unfair to organized labor. On July 1, 1921, they started a fight for an open shop against the Millworkers Union No. 141 of Fort Dodge, Iowa, and the battle is still on and will so remain until we get a closed shop contract and an eight-hour day. All reasonable means have failed to bring about a settlement, therefore we ask your co-operation in advertising the fact that this corporation is unfair to organized labor. Inasmuch as there have been traitors, who gave out fake circulars, I ask you Brothers to read the `Yellow Dog' contract as printed below and then use your own judgment as to whether or not the United States Gypsum Co. is unfair to organized labor. And we most earnestly ask your undivided moral support to bring about a closed shop contract and an eight-hour day.
"John Heslop, President,
"Millworkers Union."
In January, 1928, another circular was sent addressed as before, signed "John Heslop, President, Fred W. Knigge, Secretary-Treasurer," bearing the seal of Gypsum Mill Workers, Union No. 141, describing the plaintiff's products, and again referring to the "fight" of July 1, 1921, and stating "the strike is still in effect," and asking co-operation "in advertising the United States Gypsum Company as unfair to organized labor." Under date of May 25, 1928, another circular was sent, somewhat varied in language, but charging that plaintiff still continued the open shop and is working on the principle of the Yellow Dog contract "printed below," and stating: "We have had good results from the former circulars sent out and we again ask your co-operation and moral support in advertising the fact that the United States Gypsum Company is still unfair to organized labor." This circular was signed, "John Heslop, President, Fred Knigge, Secretary, Gypsum Mill Workers Union." Defendant, Heslop testified that as many as eight or nine hundred and twelve hundred copies of each of the circulars had been distributed to organized labor throughout the country, by sending to labor organization officials and to papers and periodicals. He further testified that the purpose was to bring pressure upon the plaintiff through the dealers to whom plaintiff sold; that his hope was that the dealer when approached by local union officials or leaders would cease to patronize plaintiff or handle its materials. The circulars were sent out with the knowledge of all members of the present Union No. 158. In the spring of 1929, Heslop approached the managers of plaintiff at Ft. Dodge and opened a discussion of the subject of unionizing its mine and mill. His suggestion was declined, and he then advised them that his union would have to continue sending the circulars, and a short time thereafter this suit was brought.
It is quite apparent from the testimony and documentary evidence in the case that the purpose of the defendants was to bring such pressure on the plaintiff as would compel plaintiff to abandon the open shop plan and return to a closed shop policy. That the method adopted was to communicate with union officials throughout the country, and particularly wherever the plaintiff sold its products in the course of interstate commerce, and induce such union officials to watch the plaintiff's materials and intimidate the dealers handling them, and thus cause the dealers to cease handling the plaintiff's materials, and to cause union men to refrain from working *231 on the materials. The testimony further shows that in quite a number of states the defendants' effort had the desired effect; that union officials approached dealers and brought to the attention of the dealers the contents of the circulars in such way as to cause the dealers to cease to purchase plaintiff's product. It would serve no purpose to recapitulate the testimony of the various witnesses who testified from the various parts of the country. Suffice it to say, the testimony shows without conflict that plaintiff's interstate sales were diminished by reason of the activities of the defendants in a material amount, and the volume of circulars being sent to so large a number of local unions and labor papers and periodicals as would doubtless result in material restriction of plaintiff's interstate sales, and would hamper and place a burden upon plaintiff's interstate commerce. Without doubt the defendants' plan and activities embrace all of the principles of the secondary boycott.
Respecting the Dr. Russell letter, I do not find that it has any very material effect upon the case. The letter was, of course, aggravating and largely false. It was written by Dr. Russell, a personal friend of the defendant Heslop, in apparent collaboration with Heslop. Dr. Russell first wrote the letter in longhand and delivered it to Heslop. Heslop had it rewritten in typewriting as I recall with some changes, and the typewritten copies were submitted to Dr. Russell. He approved them and signed ten copies. Heslop distributed a number of these copies, but not generally to the trade. He did, however, send some to periodicals, but the plan of their general circulation was not adopted, and if so was abandoned. Dr. Russell appears to have been a mere tool of Heslop and has in all probability passed out of the scene.
The questions presented for determination on the record are:
1. Did the individual defendants as such and through their organizations, Gypsum Mill Workers' Union No. 141, and Gypsum Miners' Union No. 158, combine to restrain plaintiff's interstate trade under a plan involving the principles of the secondary boycott?
2. Did the execution of said plan result in a material direct restraint of trade?
3. Are the defendants immune under section 20 of the Clayton Act?
Respecting the first and second questions, I think there is no room for controversy. The individual defendants were none of them employees of the plaintiff or any other gypsum concern. So far as the record shows the functions and activities of Gypsum Miners' Union No. 158 have been confined to the sending out of these circulars. Gypsum Mill Workers' Union No. 141, if it has any life or existence, only has been such because the individual defendants, exclusive of Russell, have used its name in connection with these circulars. The plan, as stated, was to bring pressure upon the plaintiff to compel it to abandon its open shop policy, and to unionize its mine and mill against its will. The pressure was to be brought by publishing these circulars far and wide, bringing them to the attention of local union labor leaders with the expectation that those organizations and individuals would bring them to the attention of the dealers, customers of the plaintiff, and of the workmen on jobs that used plaintiff's material, and thus intimidate dealers and induce them to refrain from using plaintiff's materials. "Watch These Materials," "Continue to Watch These Materials," were the slogans that were to be proclaimed, and in addition the declaration that the plaintiff was unfair to union labor. One would certainly be blind not to be able to perceive the intent, purpose, and natural effect of such plan if put in execution. I therefore find that the individual defendants, exclusive of Russell, individually and through the organizations named, did combine to restrain plaintiff's interstate trade and commerce by a plan involving the principles of the secondary boycott. I further find that while the restraint and actual damage has probably not been great in volume compared with the total output of plaintiff's mines and mills, yet the plan once under way, considering the great number of labor organizations and labor papers and periodicals in the country to whom such circulars were and were to be sent, a very material restraint of trade would likely be effected, to the plaintiff's irreparable damage.
Were the defendants immune under section 20 of the Clayton Act (29 USCA § 52)? None of the defendants were employees, as stated, nor were they seeking employment, nor had they been recently employees. Eight years had elapsed since any but one of them had been employed, and several years had elapsed since he had left its employ. I think section 20 of the Clayton Act has no application in such circumstances. Examination of the following cited decisions of the Supreme Court of the United States, covering a period of approximately twenty years, will disclose *232 the principles applicable to such cases, with any growth or mutations thereof settled during the period stated: Loewe v. Lawlor, 208 U.S. 274, 28 S. Ct. 301, 52 L. Ed. 488, 13 Ann. Cas. 815; Gompers v. Buck's Stove & Range Co., 221 U.S. 418, 31 S. Ct. 492, 55 L. Ed. 797, 34 L. R. A. (N. S.) 874; Eastern States Lumber Ass'n v. United States, 234 U.S. 600, 34 S. Ct. 951, 58 L. Ed. 1490, L. R. A. 1915A, 788; Lawlor v. Loewe, 235 U.S. 522, 35 S. Ct. 170, 59 L. Ed. 341; Duplex, etc., Co. v. Deering, 254 U.S. 443, 41 S. Ct. 172, 65 L. Ed. 349, 16 A. L. R. 196; American Steel Foundries v. Tri-City Council, 257 U.S. 184, 42 S. Ct. 72, 66 L. Ed. 189, 27 A. L. R. 360; Truax v. Corrigan, 257 U.S. 312, 42 S. Ct. 124, 66 L. Ed. 254, 27 A. L. R. 375; Bedford Cut Stone Co. v. Journeymen Stone Cutters' Ass'n, 274 U.S. 37, 47 S. Ct. 522, 71 L. Ed. 916, 54 A. L. R. 791.
Finally, I am of opinion that the interlocutory injunction heretofore decreed should be made permanent with such modifications as will make the same conform to this opinion. I think the form of final decree approved by the Supreme Court of the United States in Bedford Cut Stone Co. et al. v. Journeymen Stone Cutters' Association of North America et al., supra, mutatis mutandis, sufficient and proper in this case. Counsel for plaintiff will prepare the final decree in conformity with this opinion, and submit the same for approval within ten days. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543263/ | 997 A.2d 1201 (2010)
COMMONWEALTH of Pennsylvania, Appellee
v.
Sean Eugene TAPP, Appellant.
No. 1507 MDA 2009.
Superior Court of Pennsylvania.
Argued April 6, 2010.
Filed June 18, 2010.
*1202 Christopher P. Lyden, Lancaster, for appellant.
Robert Smulktis, Assistant District Attorney, Lancaster, for Commonwealth, appellee.
BEFORE: BENDER, PANELLA and LAZARUS, JJ.
OPINION BY BENDER, J:
¶ 1 Sean Eugene Tapp appeals the judgment of sentence imposed following his conviction on retrial of Possession With Intent to Deliver, 35 P.S. § 780-113(a)(30). The sentencing judge imposed a term of incarceration double that imposed after the first trial, consigning Tapp to the statutory maximum sentence of ten to twenty years. Tapp now contends that the sentence imposed was presumptively vindictive pursuant to North Carolina v. Pearce, 395 U.S. 711, 89 S. Ct. 2072, 23 L. Ed. 2d 656 (1969), and argues that the trial court failed to provide an adequate explanation for the sentence imposed, thus violating the holding in Pearce. We find Tapp's contention without merit. Accordingly, we affirm his judgment of sentence.
¶ 2 Tapp was arrested by the Lancaster Police after officers observed him near the address of a homicide suspect the officers were attempting to apprehend. Upon seeing the officers, Tapp fled. Because Tapp's appearance matched that of the homicide suspect, the officers gave chase, prompting Tapp to discard various items of contraband as he ran, including a satellite radio receiver and a sandwich bag containing 169 individual packets of crack cocaine. After subduing Tapp and searching his person, the officer discovered $1866 in cash, mostly in twenty dollar denominations. Later analysis revealed the total weight of the cocaine to be 24.7 grams.
¶ 3 In June 2007, Tapp's case proceeded to a first trial before the Honorable Michael A. Georgelis. Prior to trial, Tapp requested that the court allow him to proceed without the assistance of appointed counsel. Following the requisite colloquy, Judge Georgelis determined that Tapp in fact wished to waive his constitutional right to counsel and allowed the trial to proceed with Tapp acting pro se. After the jury returned a guilty verdict, Judge Georgelis ordered a pre-sentence investigation and, relying on the resulting report, imposed a sentence of five to ten years' incarceration. Thereafter, Tapp appealed to this Court, asserting that the colloquy the trial court administered to determine his waiver of the right to counsel was constitutionally deficient. A panel of this Court concurred in Tapp's assessment, vacated his judgment of sentence, and remanded the case for retrial.
¶ 4 In July 2009, Tapp's case proceeded to a second trial, this time before the Honorable Dennis E. Reinaker. Tapp proceeded with stand-by counsel and the Commonwealth introduced substantially the same evidence as at the previous trial. Again the jury found Tapp guilty and, relying on the pre-sentence report prepared after the first trial, Judge Reinaker imposed a new sentence of ten to twenty years' incarcerationtwice the duration of the sentence previously imposed by Judge Georgelis. Tapp filed a post-sentence motion challenging the length of his sentence, which Judge Reinaker denied, prompting Tapp to file the appeal now before us.
¶ 5 Tapp states the question for resolution as follows:
DID THE LOWER COURT ERR BY IMPOSING A SENTENCE AFTER APPELLANT'S RETRIAL THAT WAS TWICE AS SEVERE AS THE SENTENCE IMPOSED AFTER APPELLANT'S INITIAL TRIAL?
Brief for Appellant at 4.
¶ 6 This Court has held that challenges to the length of the sentence following retrial citing judicial vindictiveness implicate *1203 a discretionary aspect of the sentencing process. See Commonwealth v. Robinson, 931 A.2d 15, 20 (Pa.Super.2007). Accordingly, Tapp's right to appellate review is not absolute. See Commonwealth v. Fiascki, 886 A.2d 261, 263 (Pa.Super.2005); Commonwealth v. Hoch, 936 A.2d 515, 518 (Pa.Super.2007) ("A challenge to the discretionary aspects of a sentence must be considered a petition for permission to appeal[.]"). The Rules of Appellate Procedure mandate that to obtain review of such claims, the appellant must include in his brief a Concise Statement of Reasons Relied Upon for Allowance of Appeal. See id.; see also Pa. R.A.P. 2119(f). The defendant's Concise Statement must, in turn, raise a substantial question as to whether the trial judge, in imposing sentence, violated a specific provision of the Sentencing Code or contravened a "fundamental norm" of the sentencing process. See Fiascki, 886 A.2d at 263; Commonwealth v. Ousley, 392 Pa.Super. 549, 573 A.2d 599, 601 (1990) (citations and internal quotation marks omitted) ("[A]ppeals from the discretionary aspects of sentence are not to be granted as a matter of course, but . . . only in exceptional circumstances where it can be shown in the 2119(f) statement that despite the multitude of factors impinging on the sentencing decisions, the sentence imposed contravenes the sentencing code.") The determination of whether a particular issue poses a substantial question is to be made on a case-by-case basis. See Fiascki, 886 A.2d at 263. If the Rule 2119(f) statement is absent or if the statement provided fails to demonstrate a substantial question, this Court may refuse to accept the appeal. See id.
¶ 7 In this case, Tapp has included a Rule 2119(f) statement that articulates the basis on which he seeks appellate review, alleging judicial vindictiveness in sentencing following retrial in violation of the holding in Pearce. Brief for Appellant at 7. This Court has recognized that such claims constitute a substantial question mandating appellate review. See Robinson, 931 A.2d at 20-21. Accordingly, we grant review of Tapp's claim and shall address the merits of his argument.
¶ 8 Tapp contends that because the sentence imposed by Judge Reinaker after retrial is double that imposed by Judge Georgelis initially, the sentence is presumptively vindictive and cannot be sustained unless the Commonwealth demonstrates that Judge Reinaker based the enhanced sentence on "events subsequent to the first trial that [throw] new light upon the defendant's life, health, habits, conduct and mental or moral propensities." Brief for Appellant at 9 (quoting Pearce, 395 U.S. at 722-23, 89 S. Ct. 2072). Tapp argues further that an enhanced sentence may not be based on events or conduct that occurred prior to imposition of the original sentence but must instead be based on "new information that came to light after the retrial." Id. at 10. We find Tapp's argument unavailing as a presumption of vindictiveness does not arise on the facts of this case.
¶ 9 In Pearce, the United States Supreme Court recognized the possibility that a trial court's imposition of an enhanced sentence after retrial may be motivated by reasons personal to the judge, including vindictiveness toward the defendant for having secured relief from the original sentence on appeal. See Pearce, 395 U.S. at 725, 89 S. Ct. 2072. Finding such motivation inimical to due process, the Court held specifically that:
In order to assure the absence of such a motivation, . . . whenever a judge imposes a more severe sentence upon a defendant after a new trial, the reasons for his doing so must affirmatively appear. Those reasons must be based upon objective information concerning identifiable *1204 conduct on the part of the defendant occurring after the time of the original sentencing proceeding.
Id. at 726, 89 S. Ct. 2072.
¶ 10 Clarifying this holding in subsequent decisions, the Court recognized that "[i]n sum, [Pearce] applied a presumption of vindictiveness, which may be overcome only by objective information in the record justifying the increased sentence." U.S. v. Goodwin, 457 U.S. 368, 374, 102 S. Ct. 2485, 73 L. Ed. 2d 74 (1982). See also Wasman v. U.S., 468 U.S. 559, 565, 104 S. Ct. 3217, 82 L. Ed. 2d 424 (1984). The Court has recognized as well, however, that:
The Pearce requirements . . . do not apply in every case where a convicted defendant receives a higher sentence on retrial. Like other "judicially created means of effectuating the rights secured by the [Constitution]," Stone v. Powell, 428 U.S. 465, 482, 96 S. Ct. 3037, 3046, 49 L. Ed. 2d 1067 (1976), we have restricted application of Pearce to areas where its "objectives are thought most efficaciously served," 428 U.S. at 487, 96 S.Ct. at 3049. Accordingly, in each case, we look to the need, under the circumstances, to "guard against vindictiveness in the resentencing process." Chaffin v. Stynchcombe, 412 U.S. 17, 25, 93 S. Ct. 1977, 1982, 36 L. Ed. 2d 714 (1973) (emphasis omitted).
Texas v. McCullough, 475 U.S. 134, 138, 106 S. Ct. 976, 89 L. Ed. 2d 104 (1986).
¶ 11 Consistent with that objective, the high Court determined in McCullough that the presumption of vindictiveness could not be applied where the enhanced sentence imposed after retrial was decided by a sentencing authority different from the one that imposed the earlier sentence. See id. at 138-39, 106 S. Ct. 976. See also Chaffin v. Stynchcombe, 412 U.S. 17, 27, 93 S. Ct. 1977, 36 L. Ed. 2d 714 (1973) (determining that the defendant was not entitled to a presumption of vindictiveness in a jurisdiction where the jury imposed sentence and the composition of the sentencing jury differed between trials). The Court's analysis reflects its recognition that where the sentencer is not the same in the two proceedings, the sentencer imposing the second sentence has "no personal stake in the prior conviction and no motivation to engage in self-vindication[,]" rendering the threat of vindictiveness far more speculative than real McCullough, 475 U.S. at 139, 106 S. Ct. 976 (quoting Chaffin, 412 U.S. at 27, 93 S. Ct. 1977).
¶ 12 Moreover, the Court noted that the discretion afforded in sentencing effectively eliminated the chance of a sentence "increase," as the second sentencer assumes the full measure of discretion otherwise applied in the first sentence: "[I]t may often be that the [second sentencer] will impose a punishment more severe than that received from the [first]. But it no more follows that such a sentence is a vindictive penalty for seeking a [new] trial than that the [first sentencer] imposed a lenient penalty." McCullough, 475 U.S. at 140, 106 S. Ct. 976 (quoting Colten v. Kentucky, 407 U.S. 104, 117, 92 S. Ct. 1953, 32 L. Ed. 2d 584 (1972)). Consequently, the Court in McCullough found no basis for application of the presumption to the defendant's sentence on retrial, as the second sentence had been imposed by a judge, while the first had been determined by a jury.[1] Significantly, the Court in McCullough reached its holding even though the trial judge, as the sentencing authority on retrial, had conducted the first trial, was *1205 fully aware of the sentence the jury had imposed, and was then constrained to preside at a second trial. Id. at 140, 106 S. Ct. 976.
¶ 13 In Pennsylvania, this Court recognized the dispositive role of a different sentencer after retrial in Commonwealth v. Mikesell, 371 Pa.Super. 209, 537 A.2d 1372, 1380-81 (1988), overruled on other grounds by Robinson, 931 A.2d at 20, ("The Pearce requirements thus do not apply in every case where a convicted defendant receives a higher sentence on retrial. . . . The presumption [of vindictiveness] is also inapplicable because different sentencers assessed the varying sentences that McCullough received. In such circumstances, a sentence "increase" cannot truly be said to have taken place."). In Mikesell, however, the Court reached its holding on the basis of sentences imposed by two different judges, recognizing implicitly, that under such circumstances, vindictiveness in sentencing is no more likely than it had been in McCullough. The Court recognized further that [i]n the absence of a presumption of vindictiveness, "the defendant must affirmatively prove actual vindictiveness." Mikesell, 537 A.2d at 1380 (quoting Wasman, 468 U.S. at 569, 104 S. Ct. 3217, 82 L. Ed. 2d 424 (1984)). Because the defendant had made no attempt to prove vindictiveness by affirmative evidence, the Court determined that the trial court had not infringed his right to due process and he was not entitled to be resentenced. See id. at 1381.
¶ 14 We reaffirm Mikesell's holding on this issue. Where, as here, the defendant is sentenced on retrial by a judge different from the one who imposed sentence after the first trial, the presumption of vindictiveness established by Pearce does not apply. See McCullough, supra. Although the defendant may seek to establish vindictiveness by affirmative evidence, he must bear the burdens of production and persuasion on that issue and prove vindictiveness as a matter of fact. Where, as here, he has failed to adduce any evidence on that issue, his claim must necessarily fail.
¶ 15 For the foregoing reasons, we find Tapp's claim without merit and we affirm his judgment of sentence.
¶ 16 Judgment of sentence AFFIRMED.
NOTES
[1] At the time of the defendant's trials in McCullough, Texas law allowed a criminal defendant to opt for sentencing either by a judge or by a jury. See McCullough, 475 U.S. at 135-36, 106 S. Ct. 976. At his first trial, McCullough had opted to be sentenced by the jury, while at his second trial, he had chosen to be sentenced by the judge. Id. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543250/ | 997 A.2d 1010 (2010)
414 N.J. Super. 56
NEW JERSEY DIVISION OF YOUTH AND FAMILY SERVICES, Plaintiff-Respondent,
v.
D.M., Defendant-Appellant.
In the Matter of the Guardianship of S.M., a minor.
DOCKET NO. A-6020-08T4.
Superior Court of New Jersey, Appellate Division.
Argued March 23, 2010.
Decided June 11, 2010.
*1011 Carleen M. Steward, Designated Counsel, argued the cause for appellant (Yvonne Smith Segars, Public Defender, attorney, Ms. Steward, on the brief).
Lea C. DeGuilo, Deputy Attorney General, argued the cause for respondent (Paula T. Dow, Attorney General, attorney; Andrea M. Silkowitz, Assistant Attorney General, of counsel; Ms. DeGuilo, on the brief).
Melissa R. Vance, Assistant Deputy Public Defender, argued the cause for minor S.M. (Yvonne Smith Segars, Public Defender, Law Guardian, attorney; Ms. Vance, on the brief).
Before Judges SKILLMAN, FUENTES and GILROY.
The opinion of the court was delivered by
GILROY, J.A.D.
On remand, the trial court entered an order terminating the parental rights of D.M. and F.M., the biological mother and father, respectively, to S.M., their daughter born September 2001. D.M. appeals, but F.M. does not.
The issue presented on appeal is whether a parent's parental rights may be terminated when the New Jersey Division of Youth and Family Services (DYFS or Division) fails to prove all prongs of the best interests of the child standard, but nevertheless, the child may suffer serious psychological or emotional harm by severing the bond between the child and his or her foster parents. We conclude that any harm the child may suffer from severing that bond cannot, in and of itself, serve as a legally sufficient basis for termination of the parent's parental rights. We hold that in such a case, DYFS must still prove by clear and convincing evidence that the parent's actions or inactions substantially contributed to the forming of that bond to where any harm caused to the child by severing the bond rests at the feet of the parent. Because we find an absence of that proof, we reverse and remand for *1012 further proceedings consistent with this opinion.
Because the procedural history and statement of facts were discussed at length in our prior consolidated unreported opinion, Division of Youth & Family Services v. D.M., Nos. A-6125-06 and A-6128-06 (App.Div. August 11, 2008) (slip op. at 2-37), it is unnecessary for us to fully detail them here; rather, a summary of the procedural history and statement of facts will suffice to place this appeal in context. However, before stating that summary, it is appropriate to review the general legal principles governing termination of parental rights.
I.
"[T]he right of parents to raise their children is a fundamental one of constitutional magnitude." N.J. Div. of Youth & Family Servs. v. G.L., 191 N.J. 596, 605, 926 A.2d 320 (2007). That right, however, is not without limits. In re K.H.O., 161 N.J. 337, 346-47, 736 A.2d 1246 (1999). Rather, the parents' rights "must be balanced against `the State's parens patriae responsibility to protect the welfare of children.'" N.J. Div. of Youth & Family Servs. v. M.M., 189 N.J. 261, 294-95, 914 A.2d 1265 (2007) (quoting In re Guardianship of J.C., 129 N.J. 1, 10, 608 A.2d 1312 (1992)). "[P]resumptions of parental unfitness may not be used in proceedings challenging parental rights and all doubts must be resolved against termination." G.L., supra, 191 N.J. at 606, 926 A.2d 320.
To terminate parental rights and obtain guardianship of a child who has been placed in foster care, DYFS may file a complaint under N.J.S.A. 30:4C-15(c) alleging that termination is in "the best interests" of the child, or under subsection 15(d) alleging that the parents abandoned the child. In re Guardianship of K.L.F, 129 N.J. 32, 36-37, 608 A.2d 1327 (1992). Where the complaint is brought under the best interests of the child section of the statute, "[g]uardianship cannot be awarded... unless the court itself determines that it is in the child's best interests under N.J.S.A. 34:4C-20." Id. at 37, 608 A.2d 1327. Such actions require proof by clear and convincing evidence. N.J. Div. of Youth & Family Servs. v. C.M., ___ N.J. ___, ___, ___, A.2d ___ (2010); (slip op. at 30); N.J. Div. of Youth & Family Servs. v. L.C., 346 N.J. Super. 435, 439, 788 A.2d 330 (App.Div.2002).
Termination actions brought under N.J.S.A. 30:4C-15.1(a) are decided under a four-prong "best interests of the child" standard, first enunciated by the Court in New Jersey Division of Youth & Family Services v. A.W., 103 N.J. 591, 604-11, 512 A.2d 438 (1986), and now codified in N.J.S.A. 30:4C-15.1(a). Under that standard, parental rights may be terminated only when:
(1) The child's safety, health or development has been or will continue to be endangered by the parental relationship;
(2) The parent is unwilling or unable to eliminate the harm facing the child or is unable or unwilling to provide a safe and stable home for the child and the delay of permanent placement will add to the harm. Such harm may include evidence that separating the child from his resource family parents would cause serious and enduring emotional or psychological harm to the child;
(3) The [D]ivision has made reasonable efforts to provide services to help the parent correct the circumstances which led to the child's placement outside the home and the court has considered alternatives to termination of parental rights; and
(4) Termination of parental rights will not do more harm than good.
[N.J.S.A. 30:4C-15.1(a).]
*1013 The "four [prongs] enumerated in the best interests standard are not discrete and separate; they relate to and overlap with one another to provide a comprehensive standard that identifies a child's best interests." K.H.O., supra, 161 N.J. at 348, 736 A.2d 1246. With these principles in mind, we now state the summary of the procedural history and statement of facts leading to this appeal.
II.
The Division first became involved with D.M. and her family in June 2004, when it received a referral concerning an alleged incident of domestic violence between D.M. and F.M. During his involvement with D.M., caseworker Nicholas Mangold learned that D.M. suffered from multiple sclerosis and took medication for the illness. She also suffers from severe scoliosis. Although Mangold responded to several other referrals between June and October 2004, he never substantiated abuse or neglect by either parent.
On March 28, 2005, another DYFS caseworker transported D.M. to the Morris County Courthouse to obtain a temporary restraining order against F.M. Because the caseworker observed what she described as D.M. displaying "inappropriate and bizarre behavior," DYFS removed S.M. from her parents' care that day. On July 12, 2005, following a fact-finding hearing, the court found that D.M. had placed S.M. at risk for abuse and neglect because of D.M.'s emotional instability and erratic behavior. On the same day, the court ordered DYFS to return S.M. to the family home to the physical custody of D.M.'s mother.
On August 23, 2005, DYFS removed S.M. from the family home a second time after learning that D.M.'s mother had left S.M. in the care of D.M. who DYFS believed was unable to properly care for the child because of health issues. On that day, the court entered an order placing S.M. into foster care with Mr. and Mrs. H., where S.M. has remained since. Mr. and Mrs. H. have three children: two girls, ages nine and eleven; and a boy, age five.
On August 23, 2006, DYFS filed a guardianship complaint seeking to terminate the parents' parental rights. The matter was tried over four days in May 2007. Much of the case centered around the parties' experts.
Dr. Rachel Jewelewicz-Nelson, a psychologist, testified on behalf of DYFS. Dr. Jewelewicz-Nelson determined that D.M. and F.M. "would not be able to parent S.M. in the reasonably foreseeable future" and that "S.M. would be harmed if she were to wait any longer for permanency." D.M., supra, slip op. at 18. The doctor concluded that S.M. should be "`freed for adopting by her foster parents.'" Id. at 15.
Dr. Frederica Brown, a psychologist, testified on behalf of the Law Guardian. Although Dr. Brown determined that S.M. was "happier" with her biological parents than with her foster parents, she did not recommend reunification. Id. at 21. Instead, the doctor "advocated for an `open adoption' with some `monitored supervision with the parents.'" Id. at 23.
Dr. Susan Herschman, a psychologist, testified on behalf of D.M. and F.M. Dr. Herschman determined that a strong bond existed between S.M. and her parents, but that S.M. also "`feels comfortable'" with her foster parents. Id. at 25. The doctor "opined that termination of parental rights would do more harm than good, based upon the bond she observed between S.M. and defendants, and the fact that there had never been `any obvious abuse or neglect of [S.M.].'" Ibid. Ultimately, Dr. Herschman concluded that with additional services provided to S.M. and her biological parents, reunification would be successful. Id. at 26. After *1014 finding the opinions of Drs. Jewelewicz-Nelson and Brown more persuasive than that of Dr. Herschman, the trial court entered an order on May 22, 2007, terminating D.M.'s and F.M.'s parental rights. Both parents appealed.
We reversed, determining that DYFS had "failed to present clear and convincing evidence that S.M.'s `safety, health or development' has been or will continue to be endangered by the parental relationship," as required by N.J.S.A. 30:4C-15.1(a)(1). Id. at 39. We concluded that "[i]n the absence of such proof, termination of appellants' parental rights was improper." Id. at 39-40. In reaching that conclusion, we "noted, the `conduct' upon which the trial judge relied in weighing the first statutory factor was F.M.'s drug abuse history, D.M.'s multiple sclerosis, and some domestic violence incidents between appellants." Id. at 45-46. However, as stated infra, we determined that "there [was] no clear and convincing evidence of record that any such conduct `endangered' S.M." Id. at 50.
We also concluded that the trial court erred in finding that DYFS had satisfied the second and fourth prongs of the best interests of the child standard. Id. at 47-51. As to the fourth prong, we stated:
S.M. has been in her current foster care placement since August 23, 2005. We are, therefore, mindful that our reversal of appellants' termination order will require additional proceedings in the Family Part. We note that the trial evidence of S.M.'s bonding with her foster parents was mixed, at best. By contrast, as noted, all experts acknowledged that S.M. maintained a loving relationship with appellants. Dr. [Jewelewicz-Nelson] described S.M. as "very quiet and very constricted" during the bonding evaluation with the foster parents. The doctor emphasized S.M.'s need for permanency because, "for almost two years[,]" the child "has been living with a sense of uncertainty and lack of affiliation[.]"
Defendants may have "personality deficits that have a negative impact on their capacity to parent[,]" as Dr. [Jewelewicz-Nelson] opined in her report. Notwithstanding these deficits, the record contains evidence of a strong loving bond between S.M. and her natural parents as well as evidence of the lack of such a bond with her foster parents. Once again we note the lack of any evidence of abuse, neglect or endangerment of S.M. resulting from her parents' "personality deficits[.]"
Dr. Brown testified that S.M. showed no "enthusiasm" towards her foster mother; they engaged in no eye contact and no make[-]believe play which the doctor regarded as "not a good sign." Dr. Brown described S.M.'s foster care placement as a "caretaker arrangement" and recommended it "in the absence of something better[.]"
On remand, the Family Part must examine the present state of S.M.'s bond to her foster parents as well as appellants' current situation. We have concluded that there is not clear and convincing evidence to support the decision to terminate appellants' parental rights. "That does not mean, however, that termination may not be an appropriate resolution." J.C., supra, 129 N.J. at 25, 608 A.2d 1312. If DYFS presents "substantial evidence of the harm that may come to [S.M.] if separated from [her] foster parents[,] ... that evidence may not be disregarded, even though, as the record now stands, it does not meet the strict statutory and constitutional standards that govern the termination of parental rights." Ibid.
If, however, DYFS is unable to offer clear and convincing evidence that, at *1015 present, "moving [S.M.] ... will, to a reasonable psychological certainty, cause serious harm," In re K.L.F., 129 N.J. 32, 44-45, 608 A.2d 1327 (1992), then appropriate steps must be taken to return S.M. to her natural parents. "The standard is not that the end result cause no pain or trauma but that the child be kept from [her] parents only to avoid serious and lasting harm." Id. at 45, 608 A.2d 1327.. "We are compelled to note that much of the bonding that has taken place in this case could have been avoided if" S.M. had not been improperly removed from appellants' custody in the first place. Ibid.
[Id. at 50-52.]
Accordingly, we remanded to conduct an expeditious evidentiary hearing as to whether S.M. had bonded with her foster parents, and if that question was affirmatively answered, to further determine whether the breaking of that bond would cause the child serious psychological or emotional harm. Id. at 52. We also directed the trial court to evaluate the biological parents' current situation and the present relationship between them and S.M. Id. at 51-52. Recognizing that S.M. last visited with her parents on June 12, 2007, when she was permitted a "goodbye" visitation following the trial court's order terminating parental rights, we directed the court on remand to permit D.M. and F.M. to have sufficient visitation with their daughter for the experts to determine the relationships between S.M. and her biological parents and between S.M. and her foster parents. Ibid.
On remand, the court entered orders directing that D.M. and F.M. undergo psychological evaluations, S.M. undergo therapy, DYFS permit TSVP[1] supervised visitation between S.M. and her parents, and bonding evaluations be conducted of S.M. and her biological parents and of S.M. and her foster parents.[2] D.M. attended visitation sessions on a weekly basis with her daughter between February 24 and April 21, 2009.
At the Division's request, Dr. Jewelewicz-Nelson conducted bonding evaluations between S.M. and members of her foster family on December 8, 2008. The doctor also conducted a psychological evaluation of D.M. on February 17, 2009, and March 3, 2009, and a bonding evaluation between D.M. and S.M. on April 1, 2009. The doctor opined that "[S.M.] is definitely emotionally bonded to her foster family" and that her "bond with her foster parents has increased and strengthened since" her last evaluation approximately one year prior. She opined that adoption was appropriate and in S.M.'s best interests because "[t]he psychological and emotional risks to [S.M.] should she not be adopted [by her foster family] are significant." She stated that S.M. "does not have a relationship with [her biological parents] that is based on nurturing, trust, security and stability." The doctor concluded that another transition for S.M. would increase the probability of "irreparable and enduring harm" to her.
D.M. again engaged the services of Dr. Susan Herschman. Dr. Herschman conducted a bonding evaluation between S.M. and her foster mother on March 16, 2009, a psychological evaluation of D.M. on April 16, 2009, and a bonding evaluation between D.M. and S.M. on April 20, 2009. As to D.M., the doctor noted that D.M.'s *1016 "health has improved and she has become increasingly more independent and responsible for her own health and physical, care." Elaborating on D.M.'s independence, the doctor stated that "[w]hile, in the past, she was dependent on [F.M.], she now realizes that she cannot let his issues interfere with the reunification of [S.M.]. [D.M.] has proven that she is able to reside on her own, cook, shop, and organize transportation to get her to different appointments." Concerning her illness, the doctor noted that "[w]hile [D.M.] remains on disability, her MS is currently in remission. [D.M.] still experiences some pain, and takes medication, but when observed in evaluations, the medication did not appear to hamper or interfere with her level of alertness."
The doctor described the bond between S.M. and her foster parents as "strong" and "comfortable." She explained that S.M. feels like part of the foster family, and that the foster family was caring and loving, and that S.M. had a good relationship with her foster siblings. Dr. Herschman characterized S.M. as a resilient child who is easy-going and adapts well to her environment. Although she could not guarantee it, the doctor believed that S.M. would make a good adjustment if placed with her biological mother. The doctor stated that changing S.M.'s environment would be significant, but that "she would be able to adapt to that change without significant trauma or enduring harm." Finally, the doctor opined that termination of D.M.'s parental rights "would do more harm than good."
The Law Guardian presented Dr. Natalie Barone, a psychologist. On December 4, 2008, Dr. Barone conducted a bonding evaluation between S.M. and her foster family and a psychological evaluation of S.M. She did not conduct a bonding evaluation between S.M. and D.M., nor did she conduct a psychological evaluation of D.M.
Dr. Barone found that "[S.M.] has been consistently and lovingly cared for by her foster family over the last three years. As such, [S.M.] has developed an undeniably secure and healthy attachment with these caretakers and has emotionally thrived in their home." The doctor concluded that S.M. "considers her foster parents as her psychological parents" in that she has become "an integral part of [the foster] family" and community. The doctor stated that S.M. only has a biological tie to her natural mother and that their relationship is only conceptual. She opined that severing S.M.'s psychological attachment to her foster parents would result in S.M. suffering enduring harm while severing the relationship with her biological mother would not. In the doctor's opinion, if S.M. was separated from the foster family and her current community, she "would become withdrawn" and "depressed" and would "blame herself for the loss." The doctor acknowledged that S.M. is a resilient child, but that her resiliency could easily be broken by the loss of her foster family.
Drs. Jewelewicz-Nelson and Herschman also opined as to S.M.'s current relationship with her mother and the appropriateness of reunification. Dr. Jewelewicz-Nelson noted that D.M. "takes great care in her personal appearances" and "dresses in clothing more typical of much younger girls." She also noted that D.M. "walked with a cane" and "was bent over at almost a 90 angle due to her scoliosis" but was "sturdy on her feet."
Dr. Jewelewicz-Nelson reported that D.M. received average scores on all of the "psychometric measures," had an adequate understanding of child rearing issues, and showed adequate "coping strategies." However, according to the doctor, D.M.'s personality test indicated a "compulsive personality disorder." Although she described this is "a pervasive pattern or preoccupation *1017 with orderliness, perfectionism and control" the doctor stated that the characteristic "did not reach criteria for a diagnosis of a DSM-IV personality disorder." Finally, she noted that D.M. had the "intellectual understanding required for adequate child rearing practices."
However, Dr. Jewelewicz-Nelson opined that D.M. lacked understanding of the emotional attachment S.M. might have with her foster family. She also believed that D.M. would have difficulty recognizing S.M.'s emotional needs if reunited with her. As a result, the doctor opined that D.M. was not capable of parenting by herself.
Dr. Jewelewicz-Nelson also conducted a bonding evaluation of S.M. and D.M. The doctor observed S.M. and D.M. engage in conversation while playing cards, with S.M. telling D.M. about her foster family and various life activities. The doctor classified this as "age-appropriate activit[y]" and "content-appropriate conversations."
Dr. Herschman explained that D.M.'s psychological examination showed no depression or anxiety disorders, but revealed a "histrionic personality" characteristic, which the doctor explained was "not significant psychiatrically." The doctor described this finding as a "characteristic" consistent with "a narcissistic personality disorder" that displays itself in "the way she dresses, she's very energetic, [and] she... can be flamboyant at times." The doctor maintained that this characteristic was not dysfunctional, but rather was "part of who [D.M.] is."
Dr. Herschman also reported that during the psychological evaluation, D.M. appeared to be "a whole different person" from the last time she evaluated her during the first termination proceeding. Specifically, the doctor noted the physical difference in "how she carries herself, how she presents herself, how she relates, her alertness." Dr. Herschman testified that D.M. was open to counseling, but hesitant about the process. She also explained that D.M. "was doing everything on her own right now" including cooking and making doctor's appointments. The doctor testified that D.M. was self-sufficient and had been for the past several months.
Dr. Herschman characterized D.M. and S.M.'s relationship as "hesitant" and "uncomfortable" at first, but she attributed those observations to the lack of recent contact between D.M. and S.M. However, during the bonding evaluation, Dr. Herschman observed that S.M. was "extremely comfortable with her mother" and that S.M. "engaged in conversation throughout the evaluation with no period of silence."
Dr. Herschman admitted that D.M. has difficulty understanding some of S.M.'s feelings but that "she's beginning to." She recommended that D.M. attend individual therapy sessions and family counseling if S.M. was returned to her care. Dr. Herschman acknowledged that D.M. would need counseling regarding S.M.'s emotions toward and relationship with her foster family.
On June 23, 2009, the trial court entered an order supported by an oral decision terminating D.M.'s and F.M.'s parental rights to S.M. In so doing, the trial court rendered findings of fact as to the appropriateness of reunification and any psychological or emotional harm S.M. might suffer from the breaking of her bond with her foster parents. As to the appropriateness of reunification, the court stated:
... [D.M.] has been a motivated and consistent presence in the case since the remand.
....
... And I have to say that over the course of my exposure to [D.M.], I tend to like and approve of her. Obviously, nobody's perfect and there have been issues, but in just getting a sense of her *1018 as she comes into the case and conducts her life business under sometimes difficult circumstances, I have no problem with that proposition [(reunification)], in general.
As to the opinion of Dr. Jewelewicz-Nelson, the court stated:
I have to say that I cannot help but disagree to some extent with Dr. [Jewelewicz-Nelson]. In light of the case history, I don't know anyone who would not be angry and should not be angry and direct their anger, certainly, at the Division. We work in a very difficult case type and now that the Appellate Division has said there was a mistake made ... I cannot assign much weight to the pure fact that [D.M.] may be angry.
I do think that her thinking, her feeling, does play into her capacity to mitigate harm to [S.M.] upon reunification, but as I just said, I ... have trouble attaching negative consequences to feeling anger.
Concerning the testimony of Dr. Herschman, the court noted:
Dr. Herschman's cumulative view was that [D.M.], with appropriate counseling for both herself and [S.M.], could help [S.M.] adjust to the loss of her foster family and transition to a reunified life.
So what I distill from Dr.... Herschman also refers to the anger that [D.M.] has felt. I think on balance, my own thought is that in terms of where she is at, meaning [D.M.], in terms of her psychological functioning at this juncture, is that it is not as problematic, in my view, as Dr. [Jewelewicz-Nelson] characterizes it, and I have to say that I understand why she would be angry.
At the same time, I think that in reading and understanding Dr. Herschman's report and testimony, there are elements of her personality that, perhaps, she needs help with while she is helping or would be helping [S.M.] adjust to a reunification. So those are considerations in determining whether there should or ... can appropriately be a reunification.
In determining that S.M. would suffer serious psychological harm if the bond between her and her foster parents is broken, the court reasoned:
These are my conclusions and concerns. [S.M.] has been in foster placement since August of 2005. It is now June of 2009. We all know how that came about in terms of the procedural history. One thing we definitely don't have is a time machine and so we can't change that fact.
The years that she has been in that placement have been her years from the age of, let's see, just before she turned four, to this time when she is nearly eight.
One thing that occurs to me is that in removing [S.M.] from the foster parents and attempting a reunification with one or both of the biological parents, we are now in a situation where we have a child who not only is in a foster placement with foster parents, and all experts agree that that is a strong bond, she has also had the experience of forming attachments, and now I'm using it in a, perhaps, a laymen's sense, with a whole host of members of a more extended community.
....
I think that the experts testified, in particular I think it was Dr. Barone, talked about what attachment and bonding means at different developmental stages. This particular young child is at a stage where, I think it's fair to say, these extended community connections take on significant meaning.
... Dr. Barone said that the foster parents, quoteon Page 10 of her report, "They have built a loving community *1019 for [S.M.] that includes siblings, extended family and friends, classmates and teachers. As a result, [S.M.'s] attachment to her foster parents created various levels of bonding to many other people. By the same token, the severing of [S.M.'s] attachment to her foster parents would be correlated with the loss of [S.M.]'s entire small but significant community.
[ ]This examiner opines that removing [S.M.] from her foster family would result in severe and enduring emotional harm and would not be in her best interest."
That articulation of the risk makes sense to me. Again, not only a loss of psychological parents, perhaps, but all of these other connections, which I would say constitutes a seven, nearly eight-year-old child's extended universe, that is a significant consideration.
Dr. [Jewelewicz-Nelson] ... talked about, "the psychological and emotional risk[s] to [S.M.] should she not be adopted by this family are significant. She is likely to feel guilty ... that it is her fault that she was not adopted. She is also likely to experience intense grief and bereavement at losing this family to whom she has become quite attached during a formative part of her development."
I think that [echoes], what I'll call, the amplified concern about not only breaking a bond with foster parents, but with foster family and what I'll call foster community.
Dr. Herschman, as I mentioned before, took a different view and said that in her view, that a reunification is not likely to cause [S.M.] enduring emotional distress.... She says, of course, not likely and these are not things that can be established with certainty.
....
So what I think we are left with is the reality that because of the case history, the bonding that has occurred, although if we had the ability to go back in time would not occur, we have a situation where, in my view ... there is clear and convincing evidence and clear and convincing commonsense evidence, that breaking the current bond, which has been identified as a strong bond with the foster parents, would, to a ... reasonable degree of psychological certainty, cause serious and lasting harm to [S.M.].
And so, I'm left with the dilemma of either doing the thing that I think would right a wrong in a sense, and that is reunify [S.M.] with [D.M.] and hope that Dr. Herschman is right that its not likely that the child would suffer severe and lasting harm. Or do what my sense tells me, my experience of these type[s] of cases, my thinking through this case, and not take that risk for [S.M.], the risk that she would suffer having ... been in this placement for an extended time, what the Appellate Division told me, specifically, to look for, serious and lasting harm.
And I concluded that [this] is what would be likely to happen and the kind of harm it would have.
III.
On appeal, D.M. argues:
POINT I.
THE APPELLATE DIVISION DECISION VIOLATED D.M.'S CONSTITUTIONAL RIGHTS AND, THEREFORE, S.M. AND D.M. SHOULD BE IMMEDIATELY REUNIFIED.
POINT II.
[DYFS] FAILED TO FOLLOW THE APPELLATE DIVISION DECISION GUIDELINES AND DID NOT COMPLY WITH THE CASE MANAGEMENT *1020 ORDERS DESIGNED TO ASSIST IN REUNIFICATION.
POINT III.
[THE TRIAL JUDGE] IMPROPERLY DENIED THE MOTION FOR A PSYCHOLOGICAL EVALUATION OF THE CURRENT CARETAKERS AS WELL AS THE MOTION TO BAR THE REPORT AND TESTIMONY OF NATALIE BARONE, [PH.D.].
POINT IV.
THE FACTS UPON WHICH [THE TRIAL JUDGE] BASED HIS DECISION ARE INACCURATE AND LED TO AN IMPROPER DECISION THAT MUST BE REVERSED.
POINT V.
THE APPELLATE DIVISION DETERMINED THAT THERE WAS NO BASIS FOR THE INITIAL REMOVAL AND NARROWLY DEFINED THE SUBJECT OF THE REMAND, AND, THEREFORE, ANY REFERENCE TO EVIDENCE FROM THE INITIAL TRIAL SHOULD HAVE BEEN EXCLUDED. (NOT RAISED BELOW).
Our review of the trial court's factfinding on an appeal from termination of parental rights is limited. M.M., supra, 189 N.J. at 278, 914 A.2d 1265. "The general rule is that findings by the trial court are binding on appeal when supported by adequate, substantial, credible evidence." Cesare v. Cesare, 154 N.J. 394, 411-12, 713 A.2d 390 (1998). Such deference "is especially appropriate `when the evidence is largely testimonial and involves questions of credibility.'" Id. at 412, 713 A.2d 390 (quoting In re Return of Weapons to J.W.D., 149 N.J. 108, 117, 693 A.2d 92 (1997)). Moreover, "`[b]ecause of the family courts' special jurisdiction and expertise in family matters, appellate courts should accord deference to family court factfinding.'" N.J. Div. of Youth & Family Servs. v. H.B., 375 N.J.Super. 148, 172, 866 A.2d 1053 (App.Div.2005) (quoting Cesare, supra, 154 N.J. at 413, 713 A.2d 390). However, "[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378, 658 A.2d 1230 (1995); see also N.J. Div. of Youth & Family Servs. v. R.L., 388 N.J.Super. 81, 89, 906 A.2d 463 (App.Div.2006), certif. denied, 190 N.J. 257, 919 A.2d 850 (2007).
In Point I of her brief, D.M. argues that the trial court erred in terminating her parental rights to her daughter without clear and convincing evidence that DYFS satisfied each of the four prongs of the best interests of the child standard. D.M. contends that evidence S.M. has bonded with her foster parents and has achieved stability and permanency in the foster parents' home to where the breaking of that bond might cause S.M. serious, psychological harm is insufficient to justify termination of parental rights. D.M. asserts that the trial court improperly circumvented a constitutional and statutory scheme for terminating her parental rights, and erroneously terminated her rights based solely on S.M.'s current bond to her foster parents.
DYFS counters that on remand "D.M. showed a continuing pattern of being unable to meet S.M.'s needs" and "that foster parent bonding alone may justify termination." The Law Guardian supports the Division's position on appeal.
Because the record is devoid of evidence that D.M.'s actions or omissions substantially contributed to her daughter's bonding with the foster parents, we reverse.
In our prior opinion, we found that DYFS had failed to prove prongs (1), (2) and (4) of the best interests of the child standard by clear and convincing evidence. Accordingly, we reversed. D.M. supra, *1021 (slip op. at 53). In so doing, we noted that the evidence of S.M.'s bonding with her foster parents was at best "mixed," and that S.M. had been in her foster care placement for three years. Id. at 50. Acknowledging that S.M. had no contact with her parents since June 2007, and that S.M. may have bonded with her foster parents since that time to where the breaking of that bond may cause serious psychological or emotional harm to S.M. requiring termination of parental rights, we remanded to address that issue through the lenses of J.C., and K.L.F.
Although not due to the fault of the trial court or any party, the remand proceeding neither proceeded nor concluded as expeditiously as anticipated. The trial court conducted an evidentiary hearing and determined that as of June 2009, almost four years since S.M. was placed with her foster parents, a strong bond had developed between S.M. and the foster parents, to where the breaking of that bond "would to a ... reasonable degree of psychological certainty, cause serious and lasting harm to [S.M.]." After reaching that conclusion, the court determined that it would be in the best interest of S.M. to terminate her parents' parental rights.
The trial court's finding that S.M. would suffer psychological harm if separated from her foster parents was based on credible evidence in the record. The court weighed the opinions of the three experts, and gave greater weight to the opinions of Drs. Barone and Jewelewicz-Nelson than that of Dr. Herschman. Because "the weight to be given to the evidence of experts is within the competence of the fact-finder," LaBracio Family Partnership v. 1239 Roosevelt Ave., Inc., 340 N.J.Super. 155, 165, 773 A.2d 1209 (App.Div.2001), we discern no reason to interfere with the court's finding. However, we disagree with the trial court's conclusion that this finding alone required termination of D.M.'s parental rights. In reaching this conclusion, we recognize that the language we employed in our previous decision may have inadvertently contributed to the problem we now address. That is, the trial court may have reasonably construed our previous decision as limiting the scope of the remand hearing to determining whether S.M. had bonded with her foster parents to such a degree that severing that bond would cause her "severe and lasting harm." This analysis, per force, excludes consideration of parental fault as part of the discussion. Unfortunately, an analysis that focuses entirely on the child's bonding with his or her foster parents, without a concomitant finding of parental fault, cannot stand.
Our courts have cautiously approached termination proceedings based upon the bond formed between a child and his or her foster parents. We first addressed this question in New Jersey Division of Youth & Family Services v. T.C., 251 N.J.Super. 419, 598 A.2d 899 (1991), certif. denied, 146 N.J. 564, 683 A.2d 1160 (1992).
In T.C., the trial court found the mother fit to parent her child; nevertheless, based upon the child's bond with his foster parents, the court terminated the mother's parental rights. Id. at 431, 598 A.2d 899. We recognized that while A.W. suggested "serious psychological damage to the child" could satisfy the first prong of the best interests of the child standard, "the cause of that disturbing effect [in A.W. of parental visits upon the removed child] was rooted in the prior parent-child relationship itself and was not simply due to the child's bonding to another after removal." Id. at 433, 598 A.2d 899. While we did not reject the overall theory of termination based upon foster parent bonding, we concluded "that termination without implication of substantial parental fault and based exclusively upon foster-parent *1022 bonding during temporary placement goes beyond the articulated standards of A.W." Id. at 432-433, 598 A.2d 899. See also In re Matter of A., 277 N.J.Super. 454, 470, 649 A.2d 1310 (App.Div.1994). Lastly, in reversing the trial court's decision in T.C. to terminate the mother's parental rights, we stated:
the constitutional, social and psychological force of these conjoined principles ordinarily weighs heavily against parental termination based on the foster-parent bonding of a child whose biological parents are fit to have her returned to them, particularly in those cases in which the parent-child separation has been substantially contributed to by public agencies whose mission it is to protect the family.
[T.C, supra, 251 N.J.Super. at 440, 598 A.2d 899.]
We also acknowledge that an isolated reading of J.C. might suggest that T.C. was implicitly overruled, thus, permitting termination of parental rights to rest solely on a showing that a child has bonded with his or her foster parents, to such a degree, that severing that bond would cause the child "serious psychological or emotional harm." Supra, 129 N.J. at 25, 608 A.2d 1312. However, on reading J.C. in the light of K.L.F. and G.L., we conclude otherwise. Indeed, T.C. was cited with approval by the Court in J.C, supra, 129 N.J. at 19, 608 A.2d 1312, and in K.L.F., supra, 129 N.J. at 45, 608 A.2d 1327.
In J.C., the Court addressed the issue of "whether the parental rights of a natural mother should be terminated based on the need to protect children from potential harm that may result from being separated from foster parents with whom the children may have formed parental bonds." Supra, 129 N.J. at 5, 608 A.2d 1312. In that case, a mother voluntarily placed her three children in foster care because of homelessness, domestic abuse, and her own substance abuse. Ibid. Three years later, DYFS filed a petition for guardianship on the grounds that the mother was "unable and unwilling to stop causing the children harm," and the delay in permanent placement would have added to the harm then facing the children. Id. at 6, 608 A.2d 1312.
Following a remand, the parties stipulated to certain facts concerning the mother's rehabilitation. They agreed that she had been living in the same apartment for two years, had been gainfully employed for two years, there was after-school childcare at her workplace, and she was drug and alcohol free. Id. at 15, 608 A.2d 1312. During the pendency of the action, the mother consented to the adoption of her youngest child by the foster parents. Id. at 7, 608 A.2d 1312. As to the two older children, the court terminated the mother's parental rights to them, finding that the children "would suffer serious psychological harm if they were removed from their foster or pre-adoptive homes and returned to [the mother], and that the harm in part was attributable to [the mother's] own inability to plan for their future and failure to rehabilitate herself." Ibid. We affirmed. Ibid.
In addressing the issue presented, the Court stated:
In cases in which DYFS seeks termination of parental rights, not on grounds of current unfitness but because of potential harm to the child based on separation from a foster parent with whom the child has bonded, the quality of the proof adduced must be consistent with the interests at stake. To the extent that the quality of the child's relationship with foster parents may be relevant to termination of the natural parents' status, that relationship must be viewed not in isolation but in a broader context *1023 that includes as well the quality of the child's relationship with his or her natural parents. As suggested by In re Guardianship of J.R., 174 N.J.Super. 211, [223, 416 A.2d 62 (App.Div.1980)], prolonged inattention by natural parents that permits the development of disproportionately stronger ties between a child and foster parents may lead to a bonding relationship, the severing of which would cause profound harma harm attributable to the natural parents and cognizable under the standards set forth in A.W., supra, 103 N.J. at 604-11, 512 A.2d 438.... To show that the child has a strong relationship with the foster parents or might be better off if left in their custody is not enough. [(Cite omitted).] DYFS must prove by clear and convincing evidence that separating the child from his or her foster parents would cause serious and enduring emotional or psychological harm.
[Id. at 18-19, 608 A.2d 1312. (Emphasis added).]
The Court determined that the record did not support termination of the mother's parental rights. Id. at 25, 608 A.2d 1312. In so finding, the Court stated:
[T]hat does not mean, however, that termination may not be an appropriate resolution. DYFS has presented substantial evidence of the harm that may come to these children if separated from their foster parents. Hence, that evidence may not be disregarded, even though, as the record now stands, it does not meet the strict statutory and constitutional standards that govern the termination of parental rights.
Consequently, we remand to the trial court in order that additional evidence may be adduced directly addressing whether the two children have bonded with their foster parents and if so whether breaking such bonds would cause the children serious psychological or emotional harm.
[Ibid.]
In K.L.F., a case decided the same day as J.C., the Court also considered whether a parent's parental rights could be terminated based on psychological harm that a child might suffer after separation from his or her foster parents. Supra, 129 N.J. at 34, 608 A.2d 1327. In that case, a mother who was unable to find shelter for herself and her daughter, entered into a temporary custody agreement with DYFS and consented to the temporary placement of her daughter in foster care. Id. at 35, 608 A.2d 1327. After separation from her daughter for approximately eighteen months, DYFS placed the child with pre-adoptive foster parents. Ibid. The mother sought visitation with her daughter, but DYFS refused. Id. at 35-36, 608 A.2d 1327.
DYFS then instituted a guardianship proceeding seeking to terminate the mother's parental rights based on abandonment and on the best interests of the child standard. Id. at 36, 608 A.2d 1327. The court determined that the mother had not abandoned the children. Id. at 38, 608 A.2d 1327. The court also concluded that DYFS had failed to prove the best interests of the child standard, determining that there was sufficient evidence to support a finding that the mother was a fit parent with "the ability and capacity not only to care for [her daughter] but to minimize the trauma involved in separating [her daughter] from her foster parents." Id. at 43, 608 A.2d 1327. We affirmed, ibid., and so did the Supreme Court. Id. at 46, 608 A.2d 1327.
Like in J.C., the Court held that "injury to children need not be physical to give rise to State termination of biological parent-child relationships. Serious and lasting emotional or psychological harm to *1024 children as the result of the action or inaction of their biological parents can constitute injury sufficient to authorize termination of parental rights." Id. at 44, 608 A.2d 1327 (emphasis added). In discussing the best interests of the child standard and noting that the mother had undertaken "substantial steps to prepare a stable and secure home environment for her daughter," id. at 44, 608 A.2d 1327, the Court stated that "[t]he standard is not that the end result cause no pain or trauma but that the child be kept from its parents only to avoid serious and lasting harm." Id. at 45, 608 A.2d 1327. As to the bonding, the Court concluded that much of the bonding between the foster parents and child had taken place because of the mistaken actions of DYFS, not the mother. Ibid.
In G.L., the Court addressed the question, "[w]hen may a parent be subjected to the termination of [his or her] parental rights for failing to eliminate harm to the child posed by [his or her] spouse?" Supra, 191 N.J. at 599, 926 A.2d 320. In answering the question, the court reinforced the principle that termination of parental rights based on the best interests of the child standard "is conduct-based," id. at 608, 926 A.2d 320, not based on "[p]resumptions of parental unfitness," directing that all doubts of parental unfitness must be resolved against termination. Id. at 606, 926 A.2d 320.
G.L. involved the termination of a mother's parental rights to her newborn daughter. Prior to the daughter's birth, the mother's infant son had died under suspicious circumstances while in the care of the child's father. Id. at 599, 926 A.2d 320. The father was subsequently indicted for second-degree manslaughter and third-degree endangering the welfare of the child. Id. at 600, 926 A.2d 320. While the case was pending, the mother gave birth to her daughter.
Although the mother and father were living apart at the time of the daughter's birth, DYFS required as a condition of the mother retaining custody of her daughter to restrict the father from unsupervised visitation with the child. The mother complied. Id. at 600-01, 926 A.2d 320. Nonetheless, because the mother continued to believe that the father had not caused the injury leading to the death of her son, but had only failed to timely call for help, DYFS filed a complaint seeking custody and care of the daughter, alleging that the mother might allow the father access to the child. Id. at 601, 926 A.2d 320.
The Division's psychologist recommended reunification of the mother and daughter; however, the trial court disagreed and directed the Division to proceed with termination of parental rights. Id. at 602-03, 926 A.2d 320. Following trial, the court ordered termination of the mother's parental rights reasoning that the mother's unwillingness to sever ties with the father posed a serious risk to her daughter. We affirmed. Id. at 604, 926 A.2d 320.
The Court reversed, reaffirming that in a termination proceeding based on the best interests of the child standard "DYFS bears the burden of proving each of those prongs by clear and convincing evidence." Id. at 606, 926 A.2d 320. (Emphasis added). The Court held that the trial court's finding that the child was threatened by the mother's actions was "based on speculation and not on clear and convincing evidence. The judge simply presumed that [the mother] could not keep [the child] safe." Id. at 608, 926 A.2d 320. As to the fourth prong, the Court stated:
One final note: The trial judge considered the lack of a strong bond between [mother and child] as supporting termination. To be sure, the bond was thin as the direct result of the improvident *1025 removal of [the child] from her mother's custody in 2003. Because she has lived with others for most of her life, [the child] has naturally become attached to them and her bond with her mother was weakened. That conclusion merely satisfies the fourth prong of the statute that termination would not do more harm than good. That prong serves as a fail-safe against termination even where the remaining standards have been met. It does not provide an independent basis for termination where the other standards have not been satisfied. [The child] should never have been removed from [the mother's] custody. It follows that [the mother's] parental rights should not have been terminated. [Id. at 608-09, 926 A.2d 320 (emphasis added).]
Our reading of J.C., K.L.F. and G.L. leads us to conclude that where DYFS fails to prove all prongs of the best interests of the child standard, any psychological or emotional harm a child may suffer as a result of the breaking of the bond between the child and his or her foster parents cannot, in and of itself, serve as a legally sufficient basis for a termination of a parent's parental rights. In such a case, DYFS must still prove by clear and convincing evidence that the parent's actions or inactions substantially contributed to the forming of that bond, and that the harm caused to the child from severing that bond rests at the feet of the parent. Such proof would follow the Court's direction that termination of parental rights is "conduct-based," G.L., supra, 191 N.J. at 608, 926 A.2d 320, by requiring a showing that "[t]he parent is unwilling or unable to eliminate the harm facing the child.... Such harm may include evidence that separating the child from his [or her] resource family parents would cause serious and enduring emotional or psychological harm to the child." N.J.S.A. 30:4C-15.1(a)(2).
We found in our prior opinion that until the trial court entered the May 22, 2007 order terminating D.M.'s and F.M.'s parental rights, S.M. had maintained a loving relationship with her parents, and that at best, proof S.M. had bonded with her foster parents was "mixed." D.M., supra, slip op. at 50. We remanded to determine whether S.M. had bonded with her foster parents since May 22, 2007, and whether severing that bond would cause S.M. to suffer serious psychological or emotional harm. Id. at 52. With the trial court so determining, the question becomes whether the record contains evidence showing that D.M. substantially contributed to the forming of that bond between her daughter and the foster parents. We answer the question in the negative.
DYFS did not substantiate abuse, neglect, or abandonment against D.M. To the contrary, as noted by the trial court, the original termination had been reversed "because there was no evidence linking [D.M.'s] various issues and problems to harm to [S.M.] or even a realistic risk of harm to [S.M.]." Nor on remand did the trial court find any fault on the part of D.M. concerning her actions or omissions in not maintaining contact with her daughter while the appeal was pending, leading to a stronger bond between the child and her foster parents than between S.M. and D.M.
The trial court expressed concern over the absence of F.M., the potential for future episodes of domestic violence if F.M. returns to the family home, D.M.'s potential (but justified in the court's view) anger with the Division, and some of D.M.'s shortcomings in addressing S.M.'s emotional needs. However, none of these concerns amount to a finding of fault on D.M.'s part leading to the strengthening of the bond between S.M. and her foster parents.
*1026 Indeed, D.M.'s actions speak to the contrary. Following remand, D.M. tried to maintain a relationship with her daughter when given the opportunity. D.M. petitioned and was granted visitation with her daughter. Between February 24, 2009 and April 21, 2009, D.M. attended seven visitation sessions on a weekly basis with S.M. She also petitioned and was granted visitation during the pendency of this appeal. Accordingly, the trial court did not, and we cannot, find that D.M. substantially contributed to the bonding between S.M. and the foster parents.
The Court's recent decision in C.M., supra, supports our conclusion that termination of parental rights cannot be justified by evidence that a child may suffer serious, psychological or emotional harm by severing the bond between the child and his or her foster parents without evidence that the parent substantially caused, directly or indirectly, the harm to the child. The Court reaffirmed the principle that to terminate a parent's parental rights, DYFS bears the burden of proving by clear and convincing evidence each of the four statutory prongs of the best interests of the child standard. C.M., supra, ___ N.J. at ___, ___ A.2d ___ (slip op. at 30). That S.M. would have bonded with her foster parents between the conclusion of the first termination proceeding and the remand proceeding should not have come as a surprise, D.M. having been improperly separated from S.M. while the first appeal was pending. As noted by the Court "[i]t is well-established that the period of time a child has spent in foster care is not determinative of whether parental rights to that child should be terminated, as `[t]he protection of parental rights continues when a child is placed in foster care.'" C.M., supra, ___ N.J. at ___, ___ A.2d ___ (slip op. at 33) (quoting K.H.O., supra, 161 N.J. at 347, 736 A.2d 1246). Indeed, "[i]n respect of the first prong of the test for terminating parental rights, ... [the] Court has made clear that `[t]he statute requires that the State demonstrate harm to the child by the parent' and that the `[h]arm, in this context, involves the endangerment of the child's health and development resulting from the parental relationship.'" Ibid. (quoting K.H.O., supra, 161 N.J. at 348, 736 A.2d 1246). Here, as previously stated, we found the record devoid of any evidence, much less clear and convincing evidence, that D.M. substantially contributed to the forming of the bond between S.M. and her foster parents.
We reverse that part of the June 23, 2009 order that terminated D.M.'s parental rights to S.M. We remand to formulate a plan for reunification between D.M. and S.M. that will be in S.M.'s best interests. The plan should include therapy for D.M. and S.M., individually and jointly, and increased supervised visitation between the parent and child, leading to unsupervised daytime supervision and subsequent overnight visitation as determined by the court to minimize any emotional harm to S.M. caused by separating her from her foster family. The plan should also include an evaluation of D.M.'s present ability to care for her daughter.
We direct that the court formulate its initial plan of reunification within thirty days of the date of this decision. Because of the necessity to bring this matter to a fair and just conclusion in the best interests of S.M., we retain jurisdiction to address any issues that may occur on remand until S.M. has been fully reunited with her mother.
Reversed and remanded for further proceedings consistent with this opinion.
SKILLMAN, P.J.A.D., concurring.
In In re Guardianship of J.C., 129 N.J. 1, 25, 608 A.2d 1312 (1992), the Court "conclude[d] that there is not clear and *1027 convincing evidence to support the determination to terminate [the natural parent's] parental rights" under the applicable statutory standards. Nevertheless, the Court held that termination of parental rights still might be "an appropriate resolution" of DYFS's guardianship action. Ibid. In explaining this conclusion, the Court stated:
... DYFS has presented substantial evidence of the harm that may come to these children if separated from their foster parents. Hence, that evidence may not be disregarded, even though, as the record now stands, it does not meet the strict statutory and constitutional standards that govern the termination of parental rights.
Consequently, we remand to the trial court in order that additional evidence may be adduced directly addressing whether the two children have bonded with their foster parents and if so whether breaking such bonds would cause the children serious psychological or emotional harm.
[Ibid.]
The Court also noted that:
... In hearing a petition for termination in which the fitness of natural parents is neither relied on nor disputed by the agency, the trial court must also consider parallel proof relating to the child's relationship with his or her natural parents in assessing the existence, nature, and extent of the harm facing the child.
[Id. at 19, 608 A.2d 1312.]
On the first appeal in this case, we concluded that "there is not clear and convincing evidence to support [the trial court's] decision to terminate [D.M.'s] parental rights" under the standards set forth in N.J.S.A. 30:4C-15.1(a). N.J. Div. of Youth & Family Servs. v. D.M., No. A-6125-06T4 (Aug. 11, 2008) (slip op. at 51). Nevertheless, relying upon J.C., we held that the termination of D.M.'s parental rights still might be required in S.M.'s best interests. Accordingly, we remanded to the trial court "in order that additional evidence may be adduced directly addressing whether [S.M. has] bonded with [her] foster parents and if so whether breaking such bonds would cause [S.M.] serious psychological or emotional harm." Id. at 52. (quoting J.C., supra, 129 N.J. at 25, 608 A.2d 1312).
The trial court conducted the evidentiary hearing we ordered and found "to a moral certainty" that denying termination of parental rights and compelling reunification of S.M. with D.M. would create "a grave and substantial risk of lasting and enduring harm to [S.M.]." As the majority concludes, there is substantial credible evidence in the record to support this factual finding. See ante, 414 N.J.Super. at 74, 997 A.2d at 1021.
Under J.C. and the express terms of our remand, I would conclude that the order terminating D.M.'s parental rights to S.M. should be affirmed. However, I am now constrained to conclude, in light of the Court's subsequent decisions discussed in Judge Gilroy's opinion, particularly New Jersey Division of Youth & Family Services v. C.M., ___ N.J. ___, ___ A.2d ___ (2010), which was decided just last week, that the part of J.C. that we relied upon in remanding this case is no longer good law and that the order terminating D.M.'s parental rights must be reversed.
C.M. unequivocally states that parental rights may be terminated in a guardianship action brought under N.J.S.A. 30:4C-15(c) only if DYFS establishes each of the four standards set forth in N.J.S.A. 30:4C-15.1(a):
... [T]hose four standards or "prongs," measured against a clear and convincing evidence standard of proof, are what must govern our inquiry. In *1028 determining whether a parent's parental rights to a child are to be terminated, it is those four standards and their applicationand only those four standards that command our focus.
[Id. at ___, ___ A.2d at ___ (slip op. at 31) (emphasis added).]
A review of the remainder of the Court's opinion leaves no doubt that a court may not terminate parental rights unless each of the four standards set forth in N.J.S.A. 30:4C-15.1(a) is satisfied, even if, as in this case, the record indicates that denying termination of parental rights and compelling reunification of a child with his or her natural parent "would cause the [child] serious psychological or emotional harm." J.C., supra, 129 N.J. at 25, 608 A.2d 1312. Therefore, I concur in the reversal of the order terminating D.M.'s parental rights.
NOTES
[1] TSVP is an acronym for the Therapeutic Supervised Visitation Program.
[2] F.M. did not comply with the court's orders, did not visit S.M., and only appeared at one hearing on remand. The trial court denied the Division's and the Law Guardian's motion to enter default against F.M., as F.M. was represented by counsel. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543473/ | 997 A.2d 1098 (2010)
414 N.J. Super. 204
Charles HAYWOOD and Lori Haywood, his wife, Plaintiffs-Appellants,
v.
Ricky HARRIS and Louis P. Sterlin, Defendants, and
New Jersey Manufacturers Insurance Company, Defendant-Respondent.
DOCKET NO. A-1120-09T3.
Superior Court of New Jersey, Appellate Division.
Argued April 20, 2010.
Decided July 2, 2010.
*1099 Harvey R. Pearlman, Rutherford, argued the cause for appellants (Friedman, Kates, Pearlman & Fitzgerald, P.A., attorneys; Mr. Pearlman, on the brief).
Gregory E. Peterson, Roseland, argued the cause for respondent (Connell Foley LLP, attorneys; Brian G. Steller, of counsel and on the brief; Mr. Peterson, on the brief).
Before Judges WEFING, GRALL[1] and MESSANO.
The opinion of the court was delivered by
MESSANO, J.A.D.
On December 9, 2005, plaintiff Charles Haywood was injured in a motor vehicle accident when an uninsured driver, defendant Ricky Harris, driving a car owned by defendant Louis P. Sterlin, ran a red light and collided with plaintiff's car.[2] Plaintiff filed a complaint for uninsured motorist (UM) benefits against his automobile insurance carrier, defendant New Jersey Manufacturers' Insurance Company (NJM), and proceeded to *1100 arbitration. NJM rejected the arbitration award, and the matter was tried before a jury.
NJM stipulated to liability. Plaintiff's insurance policy contained the limitation on lawsuit option, N.J.S.A. 39:6A-8a (the LOL). The case was tried, therefore, on three issueswhether plaintiff's claimed injury, a herniated disc at L1-L2, was proximately caused by the accident; whether it was "a permanent injury," ibid.; and damages. The jury concluded Harris's negligence was the proximate cause of plaintiff's injuries, but that he had not suffered a permanent injury. It therefore made no award to plaintiff for any "noneconomic loss." See N.J.S.A. 39:6A-2i. However, the jury awarded plaintiff $75,000 "for his loss of income and/or earning capacity. . . ."
When a form order for judgment was circulated, NJM objected, contending that since plaintiff had suffered no permanent injury, he was not entitled to any award for future lost earnings. It requested that the judge "mold" the verdict to conform to the proofs at trial. The judge entered judgment in favor of plaintiff for $27,878.50, an amount that only reflected plaintiff's claim for past lost wages between the date of the accident and the trial. Plaintiff's motion for reconsideration was subsequently denied, and this appeal followed.
Plaintiff contends for a variety of reasons that the judge should not have molded the verdict and urges our reinstatement of the original jury award of $75,000. NJM contends that the evidence adduced at trial only supported an award of lost wages for the amount reflected by the judgment as entered, though it also argues that plaintiff was barred as a matter of law from recovering any future economic losses. We have considered the arguments raised in light of the record and applicable legal standards. We affirm.
I.
The testimony at trial revealed that on the date of the accident, plaintiff was thirty-three years old, married with two children, and employed as a union mason. Plaintiff declined medical attention at the scene, but when the pain in his back worsened, he sought treatment with Dr. Frank Zaccaria, a chiropractor. Zaccaria ordered an MRI and diagnosed plaintiff with a herniated disc. Plaintiff moved from the northern New Jersey area and relocated to Tuckerton, during which time he continued treatment with another chiropractor. In 2007, plaintiff also saw Dr. Cary Glastein, an orthopedist, who recommended epidural injections, which plaintiff declined.
Plaintiff moved north in the fall of 2008 and began seeing Zaccaria again. Zaccaria testified that he last saw plaintiff approximately three weeks prior to trial, that plaintiff still complained of pain in his lower back, and that his prognosis was "pretty guarded." Zaccaria opined that plaintiff, as a result of the accident, was permanently injured and could no longer work as a mason. Dr. Steven J. Meyerson, a radiologist who interpreted the MRI films at trial, confirmed Zaccaria's diagnosis of a disc herniation.
On April 25, 2008, plaintiff was involved in a second accident while riding his motorcycle. Plaintiff fractured his femur and required surgery; plaintiff also suffered fractures of two thoracic vertebrae. However, plaintiff contended that he did not injure his lower back in this accident and any residual pain in his lower back and incapacity as a result was solely from the 2005 accident.
Plaintiff testified that in 2005, his earnings were appreciably lower than they had been the prior two years, both of which exceeded $28,000 each. He believed this was due to a general slowdown in the *1101 economy. Plaintiff tried to work after the accident, but pain curtailed his activities. He could no longer lift heavy brick and stone, and, instead, found some work caulking windows on job sites and supervising the work of others. His net earnings in 2006 and 2007, as reflected on his W-2 forms, were $5,911.75 and $10,909.50 respectively. In 2008, a W-2 form in evidence revealed that plaintiff received more than $14,000 in wages, and plaintiff testified that he began receiving temporary Social Security disability benefits that year due to injuries from the motorcycle accident.
NJM produced Dr. Steven Robbins, an orthopedic surgeon, as its expert. He testified that the MRI revealed a disc bulge in plaintiff's lower back, but no herniation. Robbins opined that this condition was normal for someone of plaintiff's age and work history.
After summations, the judge charged the jury in accordance with Model Jury Charge (Civil) 8.11C, "Loss of Earnings" (2004). He also reviewed the verdict sheet with the jurors. After deciding that Harris's negligence was the proximate cause of "the injuries suffered by plaintiff," the jury concluded that plaintiff had not "sustained a permanent injury as a result of th[e] accident . . . ." The verdict sheet directed the jury to proceed to answer whether plaintiff had lost "income or suffer[ed] an impairment of his earning capacity as a result of the injuries he received in this accident . . . ." The jury unanimously answered "yes." When asked "[w]hat amount of money w[ould] fairly and reasonably compensate [plaintiff] for his loss of income and/or earning capacity?", the jury answered "$75,000." There was no objection to either the charge or the jury verdict sheet.
NJM objected to the form order of judgment and sought oral argument. Although it never moved for a judgment notwithstanding the verdict (j.n.o.v.) or a new trial, NJM argued that "any claim for future lost income was barred, as a matter of law, upon the jury's finding that plaintiff had not suffered a `permanent injury' . . . ." NJM further contended that plaintiff's maximum recovery for past lost earnings in 2006 and 2007 was $27,878.50, which reflected the maximum difference between his average earnings for the three years prior to the accident, and his actual earnings for 2006 and 2007. NJM urged the judge to "mold the verdict in this manner to deny any claim for future lost earnings and to conform with [sic] the evidence on past lost earnings."
Plaintiff contended that N.J.S.A. 39:6A-8 does not require proof of a "permanent" injury to support a claim for future economic damages, including lost wages. Although the jury rejected his claim of a permanent injury as defined by statute, he argued that there was sufficient proof to support the jury's award because plaintiff was unable to return to work as a mason. He argued that the jury could have reasonably concluded that his injury "impair[ed] his ability to earn a living for some significant time in the future."
After considering oral argument, the judge reserved decision. He executed an order on August 28, 2009 that entered judgment in the amount of $27,878.50. On the order, the judge wrote:
The jury, having rejected plaintiff's claim of permanent injury[,] did not have sufficient evidence to support an award more than three (3) times the amount of lost wages in 2006 and 2007. Plaintiff's argument for future lost wages would have to be based on his claim of permanent injury w/in the meaning of N.J.S.A. 39:6A-8a which was rejected by the jury and awarded plaintiff income lost because of his injury. However, the award for lost income *1102 must be justified and understandable, and an award so disproportionate to the evidence would constitute an injustice. The jury must have some evidentiary basis for its award, and there is no evidence to support an award of $75,000 for lost income. The $27,878.50 represents the difference between plaintiff's average net wages for 2003, 2004, 2005, and the amount earned by plaintiff in 2006 and 2007, and is an accurate amount of lost income.
The judge subsequently denied plaintiff's motion for reconsideration, and this appeal followed.
II.
We need not address all of the specific arguments raised by plaintiff because we are convinced that they essentially frame only two issues that must be resolved. First, because the jury found that he did not suffer a permanent injury, are plaintiff's claims for lost earnings limited, as a matter of law, to past lost earnings, i.e., earnings lost between the date of the accident and the date of trial? For the reasons that follow, we conclude that the answer to that question is no. Second, did plaintiff present sufficient evidence to permit the jury to award an amount of damages for future lost wages that was not based upon speculation? We conclude that plaintiff did not present sufficient evidence. As a result, we affirm.
We are also convinced, however, that the model jury charge did not provide sufficient guidance to the jury, and, in conjunction with the jury verdict sheet, it had the capacity to confuse consideration of the issue. As a result, we refer the matter to the Model Civil Jury Charge Committee for further consideration and possible revision.
(a)
NJM initially argued before the trial judge, as it does before us, that plaintiff's claim for lost earnings is limited, as a matter of law, to past lost earnings because the jury concluded he suffered no permanent injury from the accident. We reject that argument, and to the extent the trial judge reached that conclusion, we believe that was error.
Since he chose the LOL option, plaintiff could only recover for "noneconomic loss" by proving "a bodily injury which result[ed] in death; dismemberment; significant disfigurement or significant scarring; [a] displaced fracture[]; loss of a fetus; or a permanent injury within a reasonable degree of medical probability, other than scarring or disfigurement." N.J.S.A. 39:6A-8a. "`Noneconomic loss' means pain, suffering and inconvenience." N.J.S.A. 39:6A-2i. "An injury [is] considered [to be] permanent when the body part or organ . . . has not healed to function normally and will not heal to function normally with further medical treatment." N.J.S.A. 39:6A-8a.
However, the LOL has no effect upon a person's claim for "economic loss." See N.J.S.A. 39:6A-2k ("`Economic loss' means uncompensated loss of income or property, or other uncompensated expenses, including, but not limited to, medical expenses."). "We have held that plaintiffs need not satisfy the [LOL] threshold to recover for economic loss." Miskelly v. Lorence, 380 N.J.Super. 574, 578, 883 A.2d 424 (App.Div.), certif. denied, 185 N.J. 597, 889 A.2d 444 (2005). "Even evidence of prospective income loss based on a career choice that was denied plaintiff because of the injury [i]s sufficient to defeat summary judgment as to `economic damages.'" Martin v. Chhabra, 374 N.J.Super. 387, 395, 864 A.2d 1155 (App.Div.2005) (citing Loftus-Smith v. Henry, 286 N.J.Super. 477, 489, 669 A.2d 852 (App.Div.1996)).
However, we have also recognized that if a plaintiff fails to prove a "permanent injury," *1103 there must be a limit upon any award made for future economic loss. "Future economic loss must depend upon an injury which affects plaintiff's ability to earn income in the future. Hence, where the claim is based on a permanent injury within the meaning of N.J.S.A. 39:6A-8a, there must be a `permanent injury' to sustain recovery beyond wages lost during a reasonable period of recuperation and recovery." Miskelly, supra, 380 N.J.Super. at 578, 883 A.2d 424 (emphasis added).
Thus, we conclude that plaintiff was not barred as a matter of law from making a claim for future lost wages resulting from injuries in this accident, but we also conclude that plaintiff's claim was limited to only those future wages lost for a "reasonable period of recuperation and recovery." Ibid.
(b)
We recognize, as we did in Miskelly, "that this case only applies to the particular claim before us and only with a[n] . . . injury where a `permanent injury' must be found." Id. at 579 n. 3, 883 A.2d 424 (citation omitted). And, as our discussion above makes clear, "in some cases[,] future lost wages may be deemed appropriate for a period of time even though the injury is not deemed to be `permanent' within the meaning of N.J.S.A. 39:6A-8a." Ibid. We affirm the judgment under review because in this case, plaintiff failed to adduce sufficient evidence to prove a loss of future wages resulting from the injuries suffered in this accident.
We begin by noting that if the jury's answers to questions on the verdict sheet contradict the award, the trial court can mold the verdict to comport with the jury's fact findings. See Grasser v. Kitzis, 230 N.J.Super. 216, 553 A.2d 346 (App.Div. 1988). That issue is typically addressed by way of a motion for judgment notwithstanding the verdict (j.n.o.v.). See R. 4:40-2. Such a motion "must be denied if the evidence, together with the legitimate inferences therefrom, could sustain a judgment in the plaintiff's favor." Riley v. Keenan, 406 N.J.Super. 281, 298, 967 A.2d 868 (App.Div.) (citing Lanzet v. Greenberg, 126 N.J. 168, 174, 594 A.2d 1309 (1991)), certif. denied, 200 N.J. 207, 976 A.2d 384 (2009). We apply the same standard upon our review. Barber v. ShopRite of Englewood & Assoc., 406 N.J.Super. 32, 52, 966 A.2d 93 (App.Div.), certif. denied, 200 N.J. 210, 976 A.2d 386 (2009). In doing so, we give deference to the jury's determination on issues of credibility and weight of the evidence. Alves v. Rosenberg, 400 N.J.Super. 553, 566, 948 A.2d 701 (App.Div.2008).[3]
Plaintiff argues that the jury award of $75,000 was supported by the evidence because the jury could have concluded that plaintiff's injuries, while not permanent, would prevent him from working as a mason for three years beyond the date of the verdict, i.e., $75,000 was roughly equivalent to plaintiff's lost wages in 2005 and 2006, and an additional three years of lost wages.[4] NJM contends that because plaintiff presented no testimony about the length and extent of a temporary impairment, any award for future lost wages was speculative.
It has long been recognized that a claim for future lost wages must be supported by two things: (1) "a reasonable *1104 probability" of such a loss flowing from the past harm; and (2) "sufficient factual matter upon which the quantum of diminishment can reasonably be determined." Coll v. Sherry, 29 N.J. 166, 176, 148 A.2d 481 (1959). The "`mere possibility'" of lost earning capacity is insufficient. See Lesniak v. County of Bergen, 117 N.J. 12, 24, 563 A.2d 795 (1989).
Arguably, plaintiff in this case presented evidence that he would no longer be able to work as a mason and was now relegated to doing odd jobs or supervising others, resulting in a diminution of his wages. However, the second Coll prong, evidence as to the quantum of lost earnings, was never provided. In order to sustain his claim, plaintiff needed to adduce sufficient proof so that "the jury could make a dollar-and-cents calculation of the loss." Lesniak, supra, 117 N.J. at 25, 563 A.2d 795. This he did not do.
Plaintiff testified that he earned less money after the accident because he could no longer work as a mason. He relied upon the opinion of his medical expert that he was unable to continue to work as he did before because of his disc herniation. The jury was entitled to reject Zaccaria's conclusion, and did, by finding that plaintiff's injuries were not permanent in nature. See Kozma v. Starbucks Coffee Co., 412 N.J.Super. 319, 327, 990 A.2d 679 (App. Div.2010) (noting that a jury is not required to accept the plaintiff's expert testimony regarding permanency). Plaintiff provided no other expert testimony regarding his claim for future lost wages; he also presented no expert vocational testimony regarding other employment opportunities that, taking his injuries into account, might be available, and the income they might generate.
More importantly, the jury had plaintiff's W-2 forms demonstrating his past lost wages; but, they also received a W-2 form that demonstrated plaintiff earned over $14,000 in 2008, apparently prior to his second accident in April of that year, and before he received Social Security temporary disability payments. In its post-verdict submission, NJM noted that plaintiff "conceded no lost wage claim for 2008." We have not been provided with a transcript of the summations of counsel, and we can find no concession in the transcript of the proceedings.
However, in responding to NJM's post-verdict submission, plaintiff argued only that the jury could consider the difference between his earnings in 2006 and 2007 "and make a determination as to the effect this would have on [him] in the future." Plaintiff renews this same argument before us. This forces us to conclude that the jury was never provided with any evidence that plaintiff's loss of earnings actually continued in 2008, and, by implication, beyond.[5] Without such evidence, and having concluded that plaintiff was not permanently injured, the jury lacked "sufficient factual matter upon which the quantum of diminishment c[ould] reasonably be determined . . . ." Coll, supra, 29 N.J. at 176, 148 A.2d 481.
As the trial judge noted, "[t]he jury must have some evidentiary basis for its award, and there [wa]s no evidence to support an award of $75,000 for lost income." *1105 Under the particular facts of this case, we therefore agree with the judge's decision to mold the verdict and affirm the judgment under review.
(c)
We briefly address an issue that is not critical to our disposition of this appeal, but that we believe should be referred to the Committee on Model Civil Jury Charges for further consideration because of the likelihood that it will continue to arise.
In every LOL litigation involving a claim of a "permanent injury," and an additional claim for future economic loss, the plaintiff is placed between the proverbial "rock and a hard place." In order to succeed on his claim for non-economic damages, he must adduce sufficient proof of a permanent injury under N.J.S.A. 39:6A-8a. Frequently, medical proof of that injury is complemented by specific proof of future lost wages or other economic damages. Unlike this case, that proof is often placed before the jury via the testimony of an economist and/or vocational expert.
The dilemma a plaintiff faces was highlighted by what occurred in this case. NJM has argued that plaintiff should have adduced proof before the jury of a limited future income loss assuming there was no permanent injury. We believe such an alternative is unrealistic, since plaintiff would need to convince the jury his permanent injuries were going to affect his future earnings over the course of his anticipated work life, and at the same time, attempt to convince the jury that if he was not permanently injured, he suffered some limited, finite loss of earnings. Employing such a strategy seems to doom both the non-economic and economic claims to failure.
The current model jury charge regarding future loss of earnings provides:
Plaintiff also seeks to recover earnings that will be lost in the future. Plaintiff has a right to be compensated for any earnings which you find will probably be lost as a result of the injuries brought about by defendant's wrongdoing.
If you decide from the evidence in this case that it is reasonably probable that plaintiff will lose income in the future, because [either] he/she has not been able to return to work [or] he/she has not been able to keep the same job [or] he/she will be able to work for a shorter period of time, then you should also include an amount to make up for those lost earnings. In deciding how much your verdict should be to cover future lost income, think about the factors mentioned in discussing past earning losses, such as the nature, extent and duration of injury. Also consider plaintiff's age today, his/her general state of health before the accident, how long you reasonably expect the loss of income to continue and how much plaintiff can earn in any available job that he/she physically will be able to do. Obviously, the time period covering plaintiff's future lost earnings cannot go beyond that point when it was expected that he/she would stop working because of retirement, if plaintiff had not been injured. You should also consider the probabilities of increases in earnings resulting from raises for productivity or promotion, and plaintiff's life expectancy and work-life expectancy before the injury.
But you should be aware that the figures that you have been given on life expectancy and work-life expectancy are only statistical averages. Do not treat them as necessary or fixed rules, since they are general estimates. Use them with caution and use your sound judgment in taking them into account.
*1106 For future lost earnings, as well as past lost earnings, you must base your decision on probable net earnings, the take-home pay, the amount left after taxes are deducted. It is the burden of the plaintiff to prove, by a preponderance of the evidence, his/her net income and the probable loss of future earnings.
In deciding what plaintiff's future losses are, understand that the law does not require of you mathematical exactness. Rather, you must use sound judgment based on reasonable probability.
[Model Jury Charge (Civil) 8.11C, "Loss of Earnings" (2004) (footnotes omitted).]
The charge was given in this case, no objection was lodged, and we believe it was entirely appropriate.
However, along with the model charge, the jury was instructed, via the interrogatories on the verdict sheet, to decide whether plaintiff suffered any loss of earnings as a result of the accident even if it found that he had not suffered a permanent injury. While the model charge clearly instructs the jury that it may make an award only if it finds that it is "reasonably probable that plaintiff will lose income in the future, because [either] he/she has not been able to return to work [or] he/she has not been able to keep the same job [or] he/she will be able to work for a shorter period of time," it fails to include any instruction regarding how such an award must be limited in light of the finding already made regarding the non-permanent nature of the injury.
This problem was less sharply focused by the facts in Miskelly. There, the plaintiff claimed a brain injury resulting in an inability to continue his studies. 380 N.J.Super. at 575, 883 A.2d 424. His experts opined that he had a permanent injury, and his lifetime earnings would be $915,157 less as a result of his inability to obtain a graduate degree. Id. at 576, 883 A.2d 424. The jury found that the plaintiff did not suffer from a permanent injury and the judge did not submit the damages issue to the jury. Id. at 576-77, 883 A.2d 424. We affirmed, concluding that because plaintiff relied upon his lost wages over his "`work lifetime[,]' . . . the finding of no permanent injury preclude[d]" a finding of future lost earnings. Id. at 579, 883 A.2d 424.
However, as we have already noted, the jury is empowered to accept all, some or none of an expert's opinion. It is surely empowered to conclude, having found that plaintiff suffered no permanent injury, that he nonetheless suffered an injury that impaired his earnings "during a reasonable period of recuperation and recovery," id. at 578, 883 A.2d 424, and, depending upon the proofs at trial, that "`reasonable period'" might include some time into the future, though less than the rest of his anticipated work life.
When the model charge is provided together with a verdict sheet that provides no further guidance based upon the jury's predicate finding of non-permanency, we believe two undesirable results may occur. First, the jury might be confused and make no award for future economic losses despite the proofs. Or, the jury may make an award based entirely upon speculation and without regard to the fact that it had already determined plaintiff suffered no permanent injury.
We recognize that jury interrogatories "are not grounds for a reversal unless they [a]re misleading, confusing, or ambiguous," Sons of Thunder Inc. v. Borden, Inc., 148 N.J. 396, 418, 690 A.2d 575 (1997), and neither party in this case has asserted such a claim. However, "[t]he purposes of submitting interrogatories to the jury `are to require the jury to specifically consider the essential issues of the case, to clarify the court's charge to the jury, and to clarify the meaning of the *1107 verdict and permit error to be localized.'" Id. at 419, 690 A.2d 575 (quoting Wenner v. McEldowney & Co., 102 N.J.Super. 13, 19, 245 A.2d 208 (App.Div.), certif. denied, 52 N.J. 493, 246 A.2d 452 (1968) (emphasis added)). Based upon the specific facts of this case, the interrogatories permitted the trial judge to localize the error because any award for future lost earnings was speculative, and he so found.
But, given the frequency with which LOL litigation arises, and the possibility of confusion in future trials, we believe it would be prudent for the Committee on Model Civil Jury Charges to address the issue. If the proofs permit, the jury should be instructed in the general charge that although it found the plaintiff did not suffer a permanent injury, it may still make an award for future economic losses including lost earnings. However, it must also be told that such an award may not be for the balance of the plaintiff's work life, but rather must be limited only to that "reasonable period of recuperation and recovery" that proximately results from plaintiff's non-permanent injury. The jury verdict form should reinforce this limitation, either by a separate interrogatory that is answered only in the event no permanent injury is found, or by some predicate language reminding the jury of its obligation in this regard. We are further convinced that such revisions will arm the trial judge, if faced with a motion j.n.o.v. or a motion for a new trial as to damages, with additional information upon which to base his or her decision.
Affirmed.
NOTES
[1] Judge Grall did not participate in oral argument. However, the parties consented to her participation in the decision.
[2] Plaintiff's wife, Lori Haywood, asserts a per quod claim that is wholly derivative of her husband's claim. We shall use the singular "plaintiff" throughout this opinion to refer to Charles.
[3] Although NJM never filed a formal motion for j.n.o.v., we find no prejudice as a result of the procedure actually utilized, since each party was accorded an opportunity to fully brief the issue before the judge considered oral argument, and again when plaintiff moved for reconsideration.
[4] Plaintiff's average lost wages were $13,939.25 ($27,878.50 ÷ 2) for 2006 and 2007. The balance of the award, $47,121.50, actually reflects more than three times that annual loss.
[5] The issue is complicated to some extent by plaintiff's second accident. There was no evidence, beyond plaintiff's denial that he injured his back at that time, upon which the jury could conclude that any future income loss, if in fact it existed, was caused by the accident in question, and not the second accident. Indeed, in light of the admission that plaintiff generated earnings and was receiving temporary disability benefits in 2008, any calculation of a future wage loss resulting from the accident in question was purely speculative. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543464/ | 997 A.2d 104 (2010)
414 Md. 641
Harriette JULIAN
v.
Joseph BUONASSISSI, et al.
No. 37, Sept. Term, 2009.
Court of Appeals of Maryland.
June 16, 2010.
*106 Phillip Robinson (Civil Justice, Inc., Baltimore), on brief, for petitioner/cross-respondent.
C. Matthew Hill (Public Justice Center, Baltimore; Stephen D. Ball, Mitchellville), on brief, for petitioner/cross-respondent.
Kathleen S. Skullney, Foreclosure Legal Assistance Project Attorney, Legal Aid Bureau, Inc., brief and appendix as Amicus Curiae, for petitioner/cross-respondent.
Scott C. Borison, Legg Law Firm, LLC, Frederick, Michael Gregg Morin, The Holland Law Firm, PC, Annapolis, Amici Curiae Brief of Community Law Center, Maryland Cash Campaign, Maryland Consumer Rights Coalition, and St. Ambrose Housing Aid Center, for petitioner/cross-respondent.
Douglas F. Gansler, Atty. Gen. of Maryland, William D. Gruhn, Jonathan R. Krasnoff, Christopher J. Young, Asst. Attys. Gen., Brief of Amici Curiae the Consumer Protection Division of the Office of the Attorney General and the Commissioner of Financial Regulation, for petitioner/cross-respondent.
F. Robert Troll, Jr., Susan Zuhowski, O'Malley, Miles, Nylen & Gilmore, P.A., brief of Amicus Curiae The Maryland Land Title Association, for respondents/cross-petitioners.
Argued before BELL, C.J., HARRELL, BATTAGLIA, GREENE, MURPHY, ADKINS and BARBERA, JJ.
BATTAGLIA, J.
In this case we have been asked to determine whether a real estate conveyance was void ab initio or voidable under the Protection of Homeowners in Foreclosure Act, Sections 7-301 to 7-321 of the Real Property Article, Maryland Code (1974, 2003 Repl. Vol., 2006 Supp.). Although Harriette Julian, the Petitioner and alleged foreclosure rescue scam victim, failed to file a supersedeas bond[1] to stay the ratification by the Circuit Court for Charles County of a foreclosure sale of a property in which she had been in the chain of title, her appeal is not moot. In reaching the merits of her appeal, we hold that her conveyance in that chain of title would be voidable if the proof adduced during a hearing on her exceptions warranted that action, and that the Circuit Court erred in overruling her exceptions to the foreclosure sale during an earlier hearing.
*107 Facts and Procedural History
When facing foreclosure of her Waldorf, Charles County, Maryland, home as a result of her delinquency on a mortgage with AMC Mortgage Services, Inc., Harriette Julian became embroiled in an alleged foreclosure rescue scam perpetrated by Metropolitan Money Store, whereby she conveyed the property in fee simple to a LaShawn Wilson, who procured from Wells Fargo Bank, N.A., an Adjustable Rate Mortgage in the amount of $482,000, which was secured by a Purchase Money Deed of Trust on the home.
At settlement, Ms. Julian signed numerous documents, including a HUD-1 listing her as the Seller and Ms. Wilson as the Buyer, a "Fee Sheet" outlining the disbursements under the "Foreclosure Reversal Program," as well as a document granting a Power of Attorney to Fordham & Fordham Investment Group in order to complete the sale, but also to allegedly open a mortgage escrow account in her name. According to the Power of Attorney and the Fee Sheet, Fordham & Fordham was to place the equity from the sale of the property into a mortgage account from which Wells Fargo would be paid monthly for the mortgage in the amount of $4,201.66 per month for twelve months. At the bottom of the "Fee Sheet" signed by Ms. Julian, the document did not provide notice of Ms. Julian's right to rescind, and in fact, provided notice that she could not rescind the transaction:
BY SIGNING THIS STATEMENT YOU ARE STATEING [sic] YOU UNDERSTAND THE ABOVE STATEMENT AS IT READS AND YOU ALSO UNDERSTAND THAT YOU CAN NOT RESEND [sic] THIS LOAN AFTER TODAY DECEMBER 18 2006[.]
According to the HUD-1, Ms. Julian not only received $81,650.87 at the settlement table, but she was relieved of her obligation under her original mortgage with AMC in the amount of $379,948.92; the Fee Sheet contradicted the HUD-1, and listed a $95,628.87 disbursement to Ms. Julian, with $50,419.92 being placed in escrow, $20,134.17 being applied to closing costs, $10,000 being paid to Fordham & Fordham, $10,000 being paid to an "Investor," and $5,074.78 being paid to Ms. Julian. Ms. Julian believed the "Investor" was Ms. Wilson, the putative purchaser of the property.
Approximately one month after settlement, Wells Fargo assigned the loan to U.S. Bank, as trustee for Citigroup Trust, but Wells Fargo continued to service the loan. Approximately six months after settlement, in June of 2007, the Deed of Trust was recorded among the land records of Charles County.
No payments were ever made on the Note, and Wells Fargo, as servicer of the loan, directed the substitute trustees, Joseph V. Buonassissi, II, Richard E. Henning, Jr., Richard A. Lash, Keith M. Yacko, and Brian S. McNair, to pursue a foreclosure action against the Waldorf property and Ms. Wilson under the name of the current note holder, U.S. Bank, which was done on August 27, 2007, in the Circuit Court for Charles County, as Joseph Buonassissi, et al. v. LaShawn Wilson.[2] On the same day, Ms. Julian filed *108 with the Clerk of the Circuit Court for recording among the land records of Charles County a "Notice of Revocation of Power of Attorney and Rescission and Cancellation of Foreclosure Consultant Contract and Foreclosure Reconveyance Deed" ("Notice of Rescission"), putatively under the Protection of Homeowners in Foreclosure Act, Sections 7-301 to 7-321 of the Real Property Article, Maryland Code (1974, 2003 Repl. Vol., 2006 Supp.) (PHIFA).[3] Ms. Julian's Notice of Rescission recited that Ms. Wilson was a "foreclosure consultant" and/or "foreclosure purchaser," the property was a "residence in foreclosure," the Deed of Trust was a "foreclosure reconveyance," and because Ms. Wilson failed to provide the disclosures and notices required by PHIFA, Ms. Julian had the absolute right to rescind or cancel any foreclosure reconveyance for a period of three business days after Ms. Wilson had complied with the disclosure notices required by PHIFA. Ms. Julian alleged that because of the failure of notice required by PHIFA, she had the right to revoke, rescind, and cancel all documents she had signed, including any powers of attorney, all foreclosure consulting contracts, and the Deed of Trust or any reconveyance by Ms. Julian to Ms. Wilson or her agents, successors, or assigns.
The substitute trustees, however, did not discover, and could not have discovered, the Notice of Rescission when they performed a title search at the beginning of August. They did, however, publish notice of the public sale, and mail a letter to Ms. Julian's home, addressed to "Tenant(s)" which stated:
It is my understanding that you may have an interest in the Trustee's sale of the above-referenced property. I enclose herewith a copy of the notice of a Trustee's sale concerning the property.
Thereafter, the Trustees did discover Ms. Julian's Notice of Rescission during a final title search, days before the public sale to be held on September 20, 2007. At the sale, the substitute trustees, on behalf of U.S. Bank, purchased the property for $480,000.[4]
A notice that the sale of the property would be ratified and confirmed, unless cause to the contrary was shown, was issued by the Circuit Court, and Ms. Julian filed a Motion to Intervene, which was granted by a Circuit Court judge. Ms. Julian then filed Exceptions to the Sale in which she alleged that because the "agents" of Wells Fargo and U.S. Bank perpetrated the scheme to illegally acquire Ms. Julian's property, the sale must be set aside based upon the following:
*109 Because of the scheme perpetrated by the agents of the Plaintiffs (i.e., Tomlin, Regional Title and Escrow, and the Metropolitan Money Store) in helping Defendant Wilson to illegally acquire the Property from Ms. Julian's equity and interests in the Property, the Plaintiff banks cannot now come before this Court seeking its aid. The Court of Appeals has said unequivocally that this Court cannot help lenders with unclean hands and in this case, because of the acts of its agents in the transactions, the Plaintiffs cannot claim clean hands.
Ms. Julian then claimed that the Deed of Trust was void ab initio because it was obtained in violation of PHIFA:
In the present case, it is clear that Defendant Wilson and her affiliates and agents (who also acted on behalf of the Plaintiffs) acted as both a Foreclosure Consultant and Foreclosure Purchaser under PHIFA. Defendant Wilson is clearly a foreclosure purchaser, as [s]he obtained title to Ms. Julian'[s] home while that home was in foreclosure, as the result of a reconveyance.
* * *
Defendant Wilson obtained an illegal interest in Ms. Julian's property that clearly violates the public policy of this state.
* * *
Here, Ms. Julian properly rescinded her transfer of title to Defendant Wilson on August 27, 2007. The rescission document was then recorded in the land records of Charles County, Maryland. This document clearly sets forth that the transaction being rescinded falls under PHIFA. Upon this rescission, title to the Property was in the name of Ms. Julian, and the deed to Defendant Wilson was rendered void ab initio.
(Alterations added and citations omitted). She further alleged that Wells Fargo and U.S. Bank had been on "inquiry notice" that a foreclosure scam was being effectuated so that the sale to Ms. Wilson was not bona fide:
[Wells Fargo's] agents were also affiliates or agents of Defendant Wilson in the foreclosure scheme. [Wells Fargo was] therefore on notice of the foreclosure rescue scheme when it extended the mortgages to Defendant Wilson, making it clearly non-bona fide. Therefore, it could not transfer an interest to [U.S. Bank] here which was greater than it had, and which was subject to rescission by Ms. Julian.
[Wells Fargo was] also on notice due to the foreclosure proceeding that had been docketed against the Property, due to a lease agreement[5] for Ms. Julian to remain in the Property post-sale, and due to other facts. [Wells Fargo's] settlement agent, whose knowledge is imputed to [U.S. Bank], also had knowledge of various irregularities in the transaction that, at the very least, put it on notice and required investigation.
* * *
Moreover, Ms. Julian had a lis pendens on the Property beginning from the filing of the original class action lawsuit in the Circuit Court [for] Prince George's County and the current suit pending in federal court.
(Alterations and footnote added).[6] She then claimed that because she was neither *110 joined as a required party to the foreclosure action nor "properly" notified of the foreclosure action, the suit must be dismissed because the foreclosure sale was improper and irregular:
[T]he disposition of this action would most certainly "impair or impede" Ms. Julian'[s] claimed interest in the Property, which is the only subject of this action. Ms. Julian recorded a rescission of any transfer of her deed, filed a lawsuit on the subject, among other things, to occupy the Property and retain possession.
* * *
Ms. Julian is the record owner of the Property, and therefore, should have been timely and appropriately notified of these proceedings and she was not. Ms. Julian rescinded any transfer of the deed to the Property under the PHIFA statute and recorded that rescission.
She finally argued that as a result of U.S. Bank's failure to join or notify her of the foreclosure sale, her due process rights were violated, and she did not have an opportunity to exercise her right of redemption before the sale:
Ms. Julian did not have an opportunity to defend [her] home from being foreclosed upon and sold at auction. Ms. Julian had no knowledge of the foreclosure sale details until after the sale occurred.
(Alterations added).
The substitute trustees filed an opposition claiming that Ms. Julian's claims were insufficient to meet her burden of proof. They alleged there were no defects in the manner of sale of the property, and arguments to the contrary were merely "academic," because Ms. Julian received notice of the sale:
Because [Ms. Julian] alleges that she occupied the Property per an under-the-table "sale-leaseback" transaction, by her own admission, she could not escape receiving notice directed to the property. [The substitute trustees] gave notice addressed not only to [Ms. Wilson], but to the Property, and if, as alleged, [Ms. Julian] occupied the Property, then she received notice. [The substitute trustees] sent notice by both certified mail and first class mail. Although the certified letters were unclaimed despite being left at the premises, the sending, and even delivery, of the regular mail notices is presumed.
(Alterations added and citations omitted). The substitute trustees claimed that Ms. Julian lacked standing to raise exceptions, but even if she had standing, her exceptions were limited to those addressing alleged defects in the manner of the sale, and "[o]ther than the fabricated claim of lack of notice, [she] has not presented any valid exceptions, and therefore the sale must be ratified." The substitute trustees then argued that if the sale were not ratified, Ms. Julian must file a bond:
A bond is necessary because Wells Fargo lent $482,000 of the purchase money for Defendant Wilson to acquire the Property, of which $379,948.92 was used to pay off [Ms. Julian's] prior deed of trust, and $81,650.87 was reported as *111 paid to [Ms. Julian] on the HUD-1 she signed. Thus, while Wells Fargo has ongoing losses due to its loan not being paid, [Ms. Julian]by her own allegationscontinues to occupy the property for free. [Ms. Julian] is not paying Wells Fargo's mortgage; she is not making any payments on the prior deed of trust that was paid off at settlement using funds originating from Wells Fargo. Nor is [Ms. Julian] paying rent under the alleged "sale-leaseback."
(Alterations added). The substitute trustees further alleged that Ms. Julian's Notice of Rescission did not affect Wells Fargo's rights under the previously recorded Deed of Trust, because her "rescission is not alleged to have been given prior to the Defendant Wilson's conveyance of the Deed of Trust." Furthermore, they argued that there was no lis pendens because the "lawsuit was initiated after Wells Fargo loaned funds to Defendant Wilson and obtained its interest under the Deed of Trust. In any event, a class action lawsuit that does not name the lender or trustee as a party to the lawsuit cannot serve as the basis of a lis pendens."
The substitute trustees then turned to PHIFA and claimed that because its provisions "do not apply to a national bank, such as Wells Fargo," that it "cannot serve as the basis to invalidate its interest in the deed of trust on the subject property." The substitute trustees next contended that even if they were subject to PHIFA, Ms. Julian "[was] not entitled to rescind the transaction because she [had] not returned the purchase money and accrued interest," and then claimed that her failure to perfect her rescission by failing to return the money together with 8% interest within sixty days, resulted in a waiver.
They also subsequently argued that Wells Fargo was a bona fide lender for value, U.S. Bank was a bona fide assignee for value, and Ms. Julian did not allege "any facts suggesting that Wells Fargo [had] actual knowledge":
There are no facts alleged suggesting that Wells Fargo is anything but a bona-fide lender for value without notice of any defect in its grantor's title. Had Wells Fargo any knowledge or facts of such nature, it would not have lent $482,000 to Defendant Wilson. Moreover, even if [Ms. Julian's] claims regarding the other parties are true, equity should not allow [Ms. Julian] to now attack Wells Fargo's interest after she actively participated in deceiving Wells Fargo into making a $482,000 loan to Defendant Wilson.
Additionally, regardless of Wells Fargo's status as a bona-fide lender, [U.S. Bank] itself is a bona fide assignee for value, without notice of the supposed consulting arrangements between [Ms. Julian] and Defendant Wilson, and therefore takes its security interest free from the equities claimed by [Ms. Julian].
(Alterations added). The substitute trustees further alleged that no agency relationship existed, but if it did, it would have been between Metropolitan Money Store and Ms. Wilson and/or Ms. Julian, and not Wells Fargo:
Wells Fargo's dealings were limited to providing a loan to Defendant Wilson. Wells Fargo had no interaction with [Ms. Julian] and had no need for any interaction with [Ms. Julian].
Moreover, Metropolitan Money Store ("MMS") has no exclusive relationship with Wells Fargo and worked on behalf of Defendant Wilson to find her a loan, and could at most be an agent or independent contractor of Defendant Wilson. Interestingly, to the extent that [Ms. Julian] claims that she too engaged MM S to avoid foreclosure under her prior *112 deed of trust, MMS may even be her agent.
* * *
Here, neither MMS, [Regional Title and Escrow ("RTE")], nor any other party was subject to Wells Fargo's right of control, or had the requisite power or duty. Neither MMS or RTE had any power or authority to alter the terms of the loan between Wells Fargo and Defendant Wilson.
(Alterations added and citations omitted). Furthermore, the substitute trustees argued that Regional Title and Escrow acted as an escrow, not an agent of any party, but even if there were an agency relationship, the adverse actions of Metropolitan Money Store and Regional Title and Escrow could not be imputed to Wells Fargo:
[B]ecause the alleged interests of MMS and RTE in the alleged "under-the-table" deal would be directly adverse to Wells Fargo's interest, knowledge of the "under-the-table" deal cannot be attributed to Wells Fargoeven if they were an agent. Nor would such transaction be within the scope of the alleged agency. . . . Wells Fargo would not knowingly expose itself to a $482,000 loan if it knew of any impropriety in the deal.
* * *
[Ms. Julian's] allegations rely on MMS and RTE deceiving Wells Fargo into making a loan. [Ms. Julian's] allegation that RTE Title falsely prepared the HUD-1 statement relies on RTE deceiving the lender to cover-up the "under-the-table" dealingsdealings which [Ms. Julian] is a participantand deceiving Wells Fargo into loaning $482,000. . . . No respectable lender, such as Wells Fargo, would make a loan knowing that their security interest was in dispute or doubt.
(Alterations added and citations omitted). The substitute trustees also argued that Ms. Julian's allegations of equity stripping and an "under-the-table" transaction did not involve Wells Fargo, because "even if. . . the `over-the-table' documents were inaccurate, those documents were relied upon by Wells Fargo in lending the $482,000, and Wells Fargo was statutorily required to deliver the settlement funds to the parties' closing agent. . . ." Moreover, the substitute trustees claimed that the mortgage could not be invalidated because Wells Fargo was not a party to any fraud, and "even if [Ms. Wilson] obtained title through fraudulent conduct, Maryland law recognizes the validity of an instrument given to a lender." (Alterations added). Finally, they contended that the class action lawsuit filed in federal district court against Metropolitan Money Store and others, did not include Wells Fargo or any other lender as a defendant, and Ms. Julian's counsel "truly know[s] that they have no claim against Wells Fargo. . . ."
A hearing on the exceptions to the ratification of the sale was held in the Circuit Court for Charles County in January of 2008, during which Ms. Julian testified. She explained that several months after the closing on her home, she received a note placed inside the storm door of her home from Wells Fargo, but when she contacted the Bank, no one would speak with her because only Ms. Wilson's name was on the Promissory Note. Ms. Julian testified that she contacted Ms. Wilson, and in March of 2007, together proceeded to place a telephone call to Wells Fargo, during which they were informed that payments were not being made on the Note. Allegedly, as a result of the telephone call, Ms. Wilson received and completed a "fraud packet" and "ID Theft Affidavit" forwarded same to Wells Fargo, but no proof of receipt or acknowledgment from *113 Wells Fargo was evidenced. Ms. Julian testified that she and Ms. Wilson also had another conference call with Wells Fargo to figure out "some kind of payment arrangements," but no arrangements were forthcoming, because Ms. Wilson did not have sufficient financial income.
Ms. Julian's next witness, David Schickner, an investigator from the Maryland Department of Labor, Licensing and Regulation, testified that he spoke to Ms. Julian during the course of an investigation of Metropolitan Money Store, but that he did not have personal knowledge of any relationshipcollusive or otherwisebetween Wells Fargo and Regional Title and Escrow, the settlement agent. Ms. Julian's final witness, Brian Terlinsky, an attorney from the trustees' law firm, Buonassissi, Henning & Lash, testified that his office received the foreclosure matter from the servicer of Ms. Wilson's loan, Wells Fargo, who directed the substitute trustees to pursue foreclosure against the Waldorf property and Ms. Wilson under the name of the current noteholder, U.S. Bank. Mr. Terlinsky testified that LaShawn Wilson was the only name listed on the Note, and that his firm did not review the transaction between Ms. Wilson and Ms. Julian. He finally explained that in anticipation of the sale, an initial title search on the property was performed at the beginning of August 2007, and did not find Ms. Julian's Notice of Rescission, because it was recorded weeks later on August 27, 2007. He acknowledged that the Notice of Rescission did turn up in a final title search right before the public sale on September 20, 2007, but another notice to Ms. Julian was not given as a result of the discovery because Ms. Julian's Notice was found among the land records within thirty days of the sale.[7]
The substitute trustees moved for a directed verdict at the close of Ms. Julian's case and the trial judge, in granting the directed verdict, reflected that Ms. Julian was "scammed," but that she did not make a prima facie showing that Wells Fargo was complicit in a fraudulent foreclosure rescue scheme or that there was an agency relationship between Wells Fargo and the perpetrators of the fraud:
Because in this situation I have not heard evidence that satisfies me even to the point of being able to say well, they made a prima facie showing that the lender itself, Wells Fargo, had an employee who was complicit in the fraud. . . we have other people down the line who are assignees for value of whatever they had who were without notice who have some rights in this, too. It's because lenders and . . . investors make up *114 the market and make it possible for even people who can afford it to buy houses . . . who can afford to make the payments to buy houses, that a statutory scheme aimed at providing a remedy for specific misconduct on the part of unscrupulous people has to have what I'll call a saving clause to protect people who are again put in . . . not putting good money after bad, but putting good money into a situation where they would be not protected but for a saving clause such as section 7-311, or whatever it is. . . 7-311(e).
The judge noted that after resolving all inferences in favor of Ms. Julian, who he characterized as a victim, no evidence had been presented that either Ms. Wilson, Wells Fargo, or U.S. Bank could be charged with "notice or knowledge of the malfeasance" of the mortgage broker, Metropolitan Money Store. The court ratified the trustees' report of the foreclosure sale and ordered the matter to be referred to the Court Auditor for the "Statement of an Audit." Ms. Julian appealed to the Court of Special Appeals (Julian I), but did not request a stay of the Circuit Court Ratification Order or file a supersedeas bond as required by Rules 8-422[8] and 8-423.[9] The substitute trustees filed a "Motion to Require a Supersedeas Bond or Strike the Appeal"; another judge, without a hearing, ordered a supersedeas bond of $430,000 or "such amount sufficient to secure that amount pursuant to Maryland Rule 8-423(b)(2)," in order to facilitate any stay of the Order ratifying the sale.[10] Ms. Julian failed to file the bond, and appealed the supersedeas bond order as well (Julian II). The Court of Special Appeals affirmed the Circuit Court in Julian I, but declined to address the bond issue, which was then pending in that Court, because it had not been briefed. The intermediate appellate court held that violations of PHIFA rendered the deed voidable and not void ab initio. The Court also held that U.S. Bank enjoyed the same protection as a bona fide purchaser, because Ms. Julian failed to produce any evidence that Metropolitan Money Store, Regional Title and Escrow, or Ms. Wilson were agents of Wells Fargo and/or U.S. Bank or that Wells Fargo or U.S. Bank had sufficient notice to inquire into whether the transaction between Ms. Julian and Ms. Wilson was bona fide. We granted certiorari in Julian I, Julian v. Buonassissi, 408 Md. 487, 970 A.2d 892 (2009), to consider the following questions:
*115 1) Did the Court of Special Appeals err in determining that an express violation of a broad remedial statute rendered the underlying transaction merely voidable and not void ab initio?
2) In the alternative, if the transaction is voidable, did the circuit court and the Court of Special Appeals err in failing to hold that the Petitioner adduced sufficient evidence that the Respondents were on notice of the foreclosure consulting contract and thereby shift the burden to the Respondents to prove bona fides?[11]
We also granted certiorari to ponder the question presented in the cross-petition of Julian I:
3) Where a party seeks rescission, or seeks to void a transaction under circumstances where they would have to return funds received, whether the trial court abused its discretion in requiring as a condition of the continued prosecution of an appeal, that such party post a bond commensurate with the undisputed amounts they received (or an amount sufficient to secure the undisputed amount received)?
We then ordered a writ of certiorari, on our own motion, to consolidate Julian I and Julian II, Julian v. Buonassissi, 409 Md. 44, 972 A.2d 859 (2009), because Julian II dealt with the same issue raised in the cross-petition.
Discussion
As a threshold issue, we must determine whether the failure to post a supersedeas bond pursuant to Rules 8-422(a)(1) and 8-423(b)(2) deprives Ms. Julian of her appellate opportunity, because its absence could warrant depriving her of the stay of the foreclosure sale, rendering her appeal nugatory. In Mirjafari v. Cohn, 412 Md. 475, 483-84, 988 A.2d 997, 1002 (2010), Judge Harrell, writing on behalf of the Court, recently and cogently described how the absence of a supersedeas bond staying the judgment of a trial court order ratifying a foreclosure sale may moot an appeal:
In Baltrotsky v. Kugler, 395 Md. 468, 910 A.2d 1089 (2006), we noted that "Maryland decisional law speaks clearly on the question of the mootness of appellate challenges to ratified foreclosure sales in the absence of a supersedeas bond to stay the judgment of a trial court." Id. at 474, 910 A.2d at 1093. The general rule is that "the rights of a bona fide purchaser of mortgaged property would not be affected by a reversal of the order of ratification in the absence of a bond having been filed."9 Id.; Pizza v. Walter, 345 Md. 664, 674, 694 A.2d 93, 97 (1997), mandate withdrawn, 346 Md. 315, 697 A.2d 82 (1997) (withdrawing by joint motion pursuant to settlement agreement); Lowe v. Lowe, 219 Md. 365, 368, 149 A.2d 382, 384 (1959); see also Leisure Campground & Country Club Ltd. P'ship v. Leisure Estates, 280 Md. 220, 223, 372 A.2d 595, 598 (1977). As a consequence, "an appeal becomes moot if the property is sold to a bona fide purchaser in the absence of a supersedeas bond because a reversal on appeal would have no effect." Baltrotsky, 395 Md. at 474, 910 A.2d at 1093; *116 Pizza, 345 Md. at 674, 694 A.2d at 97; see also Lowe, 219 Md. at 369, 149 A.2d at 384-85. The rule operates "even though the purchaser may know that a claim is being asserted against ratification." Leisure Campground, 280 Md. at 223, 372 A.2d at 598; see also City of Hagerstown v. Long Meadow Shopping Center, 264 Md. 481, 497, 287 A.2d 242, 250 (1972).
9. A bona fide purchaser, in the case of a foreclosure sale, "is a purchaser who takes the property without notice of defects in the foreclosure sale." Baltrotsky, 395 Md. at 474-75, 910 A.2d at 1093; see also Pizza, 345 Md. at 674, 694 A.2d at 98.
The rule is intended to encourage non-party individuals or entities to bid on foreclosure sale properties, as bidders "justifiably would be reluctant to purchase a foreclosure property without assurance in the form of some security that their investments will be protected from subsequent litigation by recalcitrant mortgagors seeking to retain their property." Baltrotsky, 395 Md. at 475, 910 A.2d at 1094; see also Leisure Campground, 280 Md. at 223, 372 A.2d at 598. Likewise, the rule protects lenders who have succeeded in foreclosure but who, without operation of the rule, "could not enjoy [their] success until the new action was fully litigated, all the while bearing the lost interest income." Baltrotsky, 395 Md. at 476, 910 A.2d at 1094. Thus, "[t]he law is clear that [mortgagors] may not litigate the validity of the foreclosure at the expense of others; the posting of security is required on [the mortgagor's] part to protect the purchasers and lenders alike." Id.
(Alterations and footnote in original).
The two exceptions to the supersedeas bond requirement are 1) when a mortgagee or its affiliate purchases the disputed property at the foreclosure sale, and 2) the occasion of unfairness or collusion between the purchaser and the trustee. Baltrotsky, 395 Md. at 475, 910 A.2d at 1093; Pizza, 345 Md. at 674, 694 A.2d at 98; Leisure Campground, 280 Md. at 223, 372 A.2d at 598.
The first exception exists because "`a mortgagee who buys at a foreclosure sale does not free himself from the underlying dispute to which he is a party, and with the land in his hands, there is no reason why he should not be bound by a decision of the court requiring delivery of the property.'" Pizza, 345 Md. at 674, 694 A.2d at 98, quoting Leisure Campground, 280 Md. at 223, 372 A.2d at 598. Thereby, the mortgagee who purchases at its own sale does not have the status of a bona fide purchaser, whose liabilities upon purchase require the filing of a supersedeas bond.
In Leisure Campground & Country Club Ltd. Partnership v. Leisure Estates, 280 Md. 220, 223, 372 A.2d 595, 598 (1977), we relied on Silver v. Benson, 227 Md. 553, 177 A.2d 898 (1962), to formulate the mortgagee buy-in exception to the supersedeas bond requirement, and held that a mortgagee who buys in at a foreclosure sale does not have the status of a bona fide purchaser. This exception was based upon the assumption that a bona fide mortgagee is involved in the underlying proceedings and "still in court and amenable to court orders," thereby binding the mortgagee to a decision of the court requiring delivery of the property. Silver, 227 Md. at 559, 177 A.2d at 901.
We have yet to address, in reality, whether the assignee[12] of an original *117 mortgagee who buys at a foreclosure sale has the status of a bona fide purchaser who deserves the protection of a supersedeas bond, or that of a mortgagee who buys at its own foreclosure sale, who under the exception articulated in Leisure Campground, does not. It is clear, however, that U.S. Bank, by its nature as the foreclosing party that purchased the property at the foreclosure sale was "still in court and amenable to court orders," whether or not it was an assignee or the original mortgagee.
U.S. Bank, nevertheless, asserts that as a bona fide assignee, it is entitled to protection as a bona fide purchaser, conflating purchase with assignment. Ms. Julian, conversely, claims that her Notice of Rescission deprives U.S. Bank of its favored status as a bona fide assignee for value without notice because that notice was filed three weeks prior to the foreclosure sale and months after the assignment to U.S. Bank occurred.
In this regard, it is important to our analysis to recognize that U.S. Bank's status as a bona fide assignee, however, is distinct and separate from its status as a bona fide purchaser. As we explained in Wilson Brothers v. Cooey, 251 Md. 350, 247 A.2d 395 (1968), an assignee's status as bona fide for value and without notice is not changed by subsequent events; rather, an assignee's status is determined at the time of assignment. See also People's Banking Co. v. Fidelity & Deposit Co., 165 Md. 657, 681, 170 A. 544, 554 (1934). In Wilson, Holiday Barn, Inc. (Barn), purchased an unimproved lot and mortgaged the lot by borrowing $110,000 from Colonial Estates, Inc. (Colonial). Consideration was lacking in the Barn-Colonial transaction, but Colonial, nevertheless, assigned the mortgage to Farmers and Mechanics National Bank of Frederick (F and M), which in reliance on the mortgage as well as three other mortgages, and without notice of any defects in the Barn-Colonial transaction, lent money to Colonial. After Colonial defaulted on its loan and Barn defaulted on its mortgage, F and M assigned the Barn's mortgage to Cooey for foreclosure proceedings. The Barn's property was sold at a public sale and the sale was ratified, but after ratification, Maryland National Bank and several parties holding mechanics' liens against the property intervened, claiming proceeds of the foreclosure sale. On appeal, we explained that although there was no consideration in the transaction between the original mortgagor and the original mortgagee, "once an assignment of a mortgage is made to a bona fide purchaser for value without notice, an entirely different set of rules comes into play." Wilson, 251 Md. at 356, 247 A.2d at 399. We then expounded on how F and M, as a bona fide assignee without notice, was afforded greater protection than the original mortgagee:
While a case can be postulated where an assignee, because of notice, of insufficient consideration, or of lack of good faith might wholly or partially lose the protection accorded an innocent assignee for value, the lack of diligence exhibited by Farmers and Mechanics, about which the Lienors complain, is not sufficient to tip the scales. Farmers and Mechanics exercised reasonable prudence, and that is enough. An assignee for value of a mortgage which appears valid on its face, who has no notice of irregularity or reason to suspect it, is chargeable *118 with what appears in the land records but is not to be put to the broader investigative burden customarily shouldered by the mortgagee.
Id. at 358-59, 247 A.2d at 400 (emphasis added). In this regard, and importantly for our purpose, F and M's status as a bona fide assignee for value and without notice was determined at the time of the assignment.[13] Consequently, we held that although the Barn's mortgage was invalid as to Colonial (the original mortgagee) it was valid as to F and M, the assignee. We also noted that, "[e]ven though the mortgage was gotten without consideration by the mortgagee [Colonial] and could, therefore, be set aside by the mortgagee even in the hands of an assignee, yet if the mortgage gets into the hands of a bona fide assignee for value, who has no notice of lack of consideration, it will be good as against creditors of the mortgagee." Id. at 356, 247 A.2d at 399 (alterations added). We further noted that, "[a]n assignee for value of a mortgage which appears valid on its face, who has no notice of irregularity or reason to suspect it, is chargeable with what appears in the land records but is not to be put to the broader investigative burden customarily shouldered by the mortgagee." Id. at 359, 247 A.2d at 400.
Although U.S. Bank may have enjoyed bona fide assignee status at the time it took the assignment, a bona fide purchaser, in the case of a foreclosure sale, "`is a purchaser who takes the property without notice of defects in the foreclosure sale.'" Mirjafari, 412 Md. at 484 n. 9, 988 A.2d at 1002 n. 9, quoting Baltrotsky, 395 Md. at 474-75, 910 A.2d at 1093; see also Pizza, 345 at 674, 694 A.2d at 98. Thus, in order for U.S. Bank to be protected by the supersedeas bond rubric, U.S. Bank must have enjoyed bona fide purchaser status at the time it purchased the property at the foreclosure sale, so that it would have had to have no knowledge of any defects in the title or the foreclosure proceedings.
In granting the supersedeas bond, the Circuit Court judge, without a hearing, had to have assumed the bona fides of U.S. Bank's status. This was error. Rather, because U.S. Bank, admittedly, had notice of an alleged defect prior to the foreclosure sale, its bona fide status at the time of the sale was in question.[14] U.S. Bank, therefore, did not carry its burden to prove entitlement to the supersedeas bond protection, after having filed its motion; as a result, because of the trustees' knowledge of the Notice, under our jurisprudence, most recently explicated in Mirjafari, the prerequisite for requiring a bond was not met and Ms. Julian's failure to file a bond does not render her appeal moot. We proceed to the merits of the case.
Ms. Julian initially argues that the transfer and recording of the deed of trust, as well as Ms. Wilson's failure, as the foreclosure purchaser, to provide notice to Ms. Julian of her rescission rights under PHIFA, were statutory violations rendering their agreement under PHIFA and the Deed of Trust void ab initio. In doing so, she relies on a number of cases involving contracts, rather than deeds of trust, for *119 the proposition that violations of PHIFA rendered her deed to Ms. Wilson void from its inception. See Queen v. Agger, 287 Md. 342, 346, 412 A.2d 733, 735 (1980); Downing Dev. Corp. v. Brazelton, 253 Md. 390, 398-400, 252 A.2d 849, 854 (1969); Thorpe v. Carte, 252 Md. 523, 529-30, 250 A.2d 618, 621-22 (1969); Goldsmith v. Manufacturers' Liab. Ins. Co. of N.J., 132 Md. 283, 286, 103 A. 627, 628 (1918); Webb v. Haeffer, 53 Md. 187, 190 (1880).
U.S. Bank asserts that, even assuming that Ms. Julian was induced fraudulently to enter into a foreclosure consulting agreement with Metropolitan Money Store and Ms. Wilson, fraudulent inducement renders the instant deed of trust, at most, voidable. U.S. Bank contends that if the Legislature in PHIFA intended to abrogate the common law, it would have done so explicitly.
The distinction between a transaction being deemed void and voidable is clearly an important one. A void contract "is not a contract at all," Restatement (Second) of Contracts § 7 cmt. a (1981), and all parties, present and future, would be equally allowed to avoid the contract. See United States for the Use of the Trane Co. v. Bond, 322 Md. 170, 179-80, 586 A.2d 734, 738 (1991); Monumental Building Ass'n v. Herman, 33 Md. 128, 132 (1870); Harding v. Ja Laur Corp., 20 Md.App. 209, 214, 315 A.2d 132, 135 (1974) ("A deed obtained through fraud, deceit or trickery is voidable as between the parties thereto, but not as to a bona fide purchaser. A forged deed, on the other hand, is void ab initio.").
A voidable contract, on the other hand, is "one where one or more parties thereto have the power, by a manifestation of election to do so, to avoid the legal relations created by the contract, or by ratification of the contract to extinguish the power of avoidance." Restatement (Second) of Contracts § 7 (1981); see Coopersmith v. Isherwood, 219 Md. 455, 461, 150 A.2d 243, 247 (1959) (adopting Restatement of Contracts § 13 (1932), precursor to § 7). We have long recognized that contracts obtained by fraud are not absolutely void, but are "voidable at the election of the parties affected by the fraud" and "binding until properly avoided." Urner v. Sollenberger, 89 Md. 316, 332, 334, 43 A. 810, 811-12 (1899); see also Iseli v. Clapp, 254 Md. 664, 669-72, 255 A.2d 315, 318-19 (1969) (holding that a foreclosure rescue scam victim's deed was voidable, but not as against innocent third parties); Hoffman v. Seth, 207 Md. 234, 239, 114 A.2d 58, 60 (1955) (stating that an agreement or conveyance procured by a false representation of a material fact is voidable, but not void); Wicklein v. Kidd, 149 Md. 412, 424-25, 131 A. 780, 784-85 (1926).[15]
The distinction between a void contract and a voidable one is especially important *120 in situations involving deeds; once a deed is considered void ab initio or of no legal effect, there are lasting consequences to everyone in the subsequent chain of title. As a result, we have been circumspect at common law[16] in finding a deed void ab initio and have limited our rulings regarding voidness to circumstances that go to the face of the deed, e.g., forgery. See Maskell v. Hill, 189 Md. 327, 335, 55 A.2d 842, 845 (1947) (holding that a forged deed is a nullity); see also Harding, 20 Md.App. at 214, 315 A.2d at 135 ("A forged deed. . . is void ab initio."). In Harding, our intermediate appellate court discussed how a forged deed, void from inception, does not protect bona fide purchasers:
[T]here can be no bona fide holder of title under a forged deed. A forged deed, unlike one procured by fraud, deceit or trickery is void from its inception. The distinction between a deed obtained by fraud and one that has been forged is readily apparent. In a fraudulent deed an innocent purchaser is protected because the fraud practiced upon the signatory to such a deed is brought into play, at least in part, by some act or omission on the part of the person whom the fraud is perpetrated. He has helped in some degree to set into motion the very fraud about which he later complains. A forged deed, on the other hand, does not necessarily involve any action on the part of the person against whom the forgery is committed. So that if a person has two deeds presented to him, and he thinks he is signing one but in actuality, because of fraud, deceit or *121 trickery he signs the other, a bona fide purchaser, without notice is protected. On the other hand, if a person is presented with a deed, and he signs that deed but the deed is thereafter altered e.g. through a change in the description or affixing the signature page to another deed, that is forgery and a subsequent purchaser takes no title.
Id. at 215, 315 A.2d at 136.
With respect to alleged violations of statutes, we have recognized that not all contracts that transgress in that regard are necessarily void, but are dependent upon legislative intent. See Beard v. American Agency Life Ins. Co., 314 Md. 235, 254-55, 550 A.2d 677, 686-87 (1988); DeReggi Constr. Co. v. Mate, 130 Md.App. 648, 663-65, 747 A.2d 743, 751-52 (2000) (holding that a violation of the Consumer Protection Act will not render a contract unenforceable without proof of injury or damage). As we recognized in Lester v. Howard Bank, 33 Md. 558, 564 (1871), we examine the statute as a whole:
"[B]efore the rule can be applied in any case of a statute prohibiting or enjoining things to be done, with a prohibition and a penalty only for doing a thing which it forbids, ... the statute must be examined as a whole to find out whether or not the makers of it meant that a contract in contravention of it should be void, or that it was not so to be. In other words, whatever may be the structure of the statute in respect to prohibition and penalty, or penalty alone, that is not to be taken as granted that the Legislature meant that contracts in contravention of it were to be void, in the sense that they were not to be enforced in a court of justice."
Id., quoting Harris v. Runnels, 53 U.S. 79, 84, 12 How. 79, 13 L. Ed. 901, 903 (1851).
Hudson v. Maryland State Housing Co., 207 Md. 320, 114 A.2d 421 (1955) and Romm v. Flax, 340 Md. 690, 668 A.2d 1 (1995) are particularly instructive in determining whether failure to comply with a statutory provision renders a deed voidable or void. In Hudson, Richard I. Hudson entered into two land installment contracts with a real estate corporation, Maryland State Housing Company, for the purchase and sale of property. The contracts were land installment contracts under the "Land Instalment Contract Law,"[17] which was enacted by Chapter 596 of the Maryland Laws of 1951, codified at Sections 118 to 124 of Article 21, Maryland Code (1951), was "remedial in character" and enacted "to curb serious actual or potential evils." Hudson, 207 Md. at 331, 114 A.2d at 425; Spruell v. Blythe, 215 Md. 117, 122, 137 A.2d 183, 186 (1957).[18]
Hudson, who fell behind in his payments and faced foreclosure, demanded rescission of the contracts, claiming that the Housing Company did not furnish him with a signed copy of the first contract, in contravention of statutory requirements. Section 119 of Article 21, Maryland Code *122 (1951) requiring a signed copy of the installment contract provided:
(1) Every land instalment contract shall be evidenced by an instrument in writing signed by all of the parties thereto containing all of the terms to which they have agreed.
(2) At or before the time the vendee signs the instrument, the vendor shall deliver to him an exact copy of it and the vendee shall give the vendor a receipt showing that he has received the copy of the instrument. If such copy was not executed by the vendor, then unless the vendor within fifteen (15) days after notice that the vendee has signed, delivers to him a copy of the instrument signed by the vendor, the agreement and the instruments signed by the vendee shall be voidable at the option of the vendee and the vendor shall immediately upon demand refund to the vendee all payments and deposits theretofore made.
(3) Until the vendee signs a land instalment contract and receives a copy of it, signed by the vendor the vendee has an unconditional right to cancel the contract and to receive immediate refund of all payments and deposits made on account of or in contemplation of the contract. A request for such refund shall operate to cancel the contract; or
(4) When any such payment or deposit is accepted by the vendor from a vendee, the vendor shall immediately deliver to him a receipt therefor, which clearly states in 12-point type or larger, in typewriting or in legible handwriting his rights under paragraph (3) above.
In interpreting this language, we determined that an installment contract was voidable. In so doing, we contrasted the language of Section 119 with the "Retail Instalment Sales Act," then found at Sections 116 to 140 of Article 83, Maryland Code (1951), which, by its provisions, rendered contracts made in contravention of its provisions absolutely void:
Sec. 135 (Waivers by Buyer.) No act, agreement or statement of any buyer in any instalment agreement, shall constitute a valid waiver of any benefit or protection under the provisions of this sub-title.
We concluded that because the Land Instalment Contract Law included no comparable provision to the Retail Instalment Sales Act, noncompliance with the former rendered the deed voidable, rather than absolutely void.[19]
In Romm, in a suit for specific performance of a residential real estate contract, we were tasked with determining whether a seller's failure to provide a disclosure or disclaimer statement regarding rescission to the buyers of residential real estate, as required by Section 10-702 of the Real Property Article, Maryland Code (1974, 1988 Repl. Vol., 1994 Supp.), rendered the contract void. Section 10-702(g)(1) required the seller of residential real property to complete and deliver to the purchaser *123 a disclosure or disclaimer statement on or before entering into a contract of sale and provided:
(g) Effect of failure to deliver a statement.(1) If the disclosure statement is delivered later than 3 days after the vendor enters into a contract of sale with the purchaser, the contract is void.
(Emphasis added). In interpreting the meaning of the word "void," we declined to interpret it literally to mean "null and void." We stated that to do so, would have permitted the seller to get out of a disadvantageous deal, by choosing to withhold the required disclosure statement. We noted that to define "void" literally would be inconsistent with the legislative intent to grant rescission rights to purchasers rather than sellers. In holding that the term "void" meant "voidable at the option of the purchaser," we concluded that the failure of the seller to deliver a disclosure or disclaimer statement as required by the statute did not render the entire residential real estate contract void. Romm, 340 Md. at 697-98, 668 A.2d at 4-5.
Turning to the present context, we note that PHIFA was enacted in 2005 as emergency legislation in order to protect financially distressed homeowners from con artists who would convince the owners to transfer title to their property to "investors" and enable the scammer to take the equity in the home or the value of the house less the money owed on it. Sections 7-301 to 7-321 of the Real Property Article originated as Senate Bill 761 and House Bill 1288, and the resulting enactment became effective on October 1 as Chapter 509 of the Maryland Laws of 2005.[20] The preamble to the statute[21] provides that the legislation was intended, in pertinent part, "FOR the purpose of ... prohibiting foreclosure consultants and foreclosure purchasers from engaging in certain practices; requiring a homeowner to be provided with copies of certain documents; providing that certain provisions in certain documents are void; prohibiting certain documents from being recorded within a certain period;...."
Under PHIFA, a "foreclosure purchaser"[22] is obliged to provide the homeowner *124 with a document entitled "Notice of Right to Cancel Transfer of Deed of Title," as well as furnish a copy to the homeowner immediately upon execution of any document that includes a foreclosure reconveyance:
(c) Notice of right to cancel transfer. (1) If a foreclosure reconveyance is included in a foreclosure consulting contract or arranged after the execution of a foreclosure consulting contract, the foreclosure purchaser shall provide the homeowner with a document entitled "NOTICE OF RIGHT TO CANCEL TRANSFER OF DEED OR TITLE."
* * *
(d) SameCopy to homeowner.The foreclosure purchaser shall provide the homeowner with a copy of the Notice of Right to Cancel Transfer of Deed or Title immediately on execution of any document that includes a foreclosure reconveyance.
Section 7-310. The language in the statute is absolutely devoid of references regarding whether the dearth of such notice renders the deed void or voidable.
PHIFA also provides homeowners with the right to rescind:
(a) In general.In addition to any other right under law to cancel or rescind a contract, a homeowner has the right to:
(1) Rescind a foreclosure consulting contract at any time; and
(2) Rescind a foreclosure reconveyance at any time before midnight of the 3rd business day after any conveyance or transfer in any manner of legal or equitable title to a residence in foreclosure.
Section 7-305(a). The time period for rescission "does not begin to run until the foreclosure purchaser has complied with [Section 7-310]," which includes providing the homeowner with notice of her right to rescind. Section 7-310(e). In addition, PHIFA states that a deed or other document affecting title to the homeowner's residence may not be recorded during the 3-day rescission period. Section 7-310(k). Again, no language in the statute describes whether noncompliance with these requirements renders the deed void or voidable.
In enacting PHIFA, the Legislature did explicitly state that activities that were violative of certain provisions of the statute were void. The provisions expressly declared void by PHIFA are those that would waive a homeowners' rights; the provisions, rather than the entire deed, are subject to being declared void. See Sections 7-306(f), 7-310(f), 7-314(f), and 7-318(b).[23]
*125 Ms. Julian, however, contends that the Statute need not contain a "talismanic phrase specifying that any transaction in violation of the statute is void ab initio," to render the deed of trust void, and relies on Pagenhardt v. Walsh, 250 Md. 333, 243 A.2d 494 (1968), Dryfoos v. Hostetter, 268 Md. 396, 302 A.2d 28 (1973), and Ameriquest Mortgage Co. v. Paramount Mortgage Services, Inc., 184 Md.App. 120, 964 A.2d 279 (2009), for this proposition.
In Pagenhardt, we interpreted Section 30 of Article 21, Maryland Code (1957, 1966 Repl. Vol.), requiring affidavits of consideration to import validity to a mortgage or deed of trust, and provided that a mortgage or deed of trust is not valid except as between the parties thereto, unless there was an affidavit regarding consideration:
No mortgage or deed of trust shall be valid except as between the parties thereto, unless there be endorsed thereon an oath or affirmation of the mortgagee or the party secured by a deed of trust that the consideration recited in said mortgage or deed of trust is true and bona fide as therein set forth.
The affidavit of consideration in question was sufficient and otherwise correct, except the affiant's name was omitted. We interpreted the explicit statutory language that no deed of trust "shall be valid except as between the parties thereto, unless ..." as meaning that where the affidavit of consideration was deficient in form, as opposed to content, the mortgage was not valid, but was to be given effect as an equitable mortgage as between the parties and those having actual notice.
In Dryfoos, the question presented involved a deficient affidavit of disbursement, which completely voided the transaction. Equity was not invoked because of statutory language that had been added by Chapter 718 of the Maryland Laws of 1968, to wit, that a deed of trust was not valid either as between the parties or as to any third parties, unless there was an affidavit regarding disbursement of funds:
(b) No purchase money deed of trust involving land any part of which is situated in Maryland, shall be valid either as between the parties or as to any third parties unless such deed of trust contains or has endorsed upon it at a time prior to recordation, the oath or affirmation of the party secured by such deed of trust stating that the amount of the loan which said deed of trust has been given to secure was paid over and disbursed by the party secured by the deed of trust to either the borrower or the person responsible for disbursement of funds in the closing transaction or their respective agent at a time no later than the final and complete execution of the deed of trust, provided, however, that this subsection shall not apply where a deed of trust is given to a seller in a transaction in order to secure payment to him of all or part of the purchase price of said property.
Section 30 of Article 21, Maryland Code (1957, 1966 Repl. Vol., 1971 Supp.).
In the present situation, the Legislature has spoken clearly when a provision was to *126 be voided for violation of PHIFA. With respect to the notice of rescission language, the Legislature failed to include a reference to "void," as well as the word "valid," which was the term that precipitated the results in Pagenhardt and Dryfoos. In the absence of any language requiring the abrogation of a deed for violation of the notice requirement, we would be loathe to render such deeds void from their inception. See Brown v. State, 359 Md. 180, 216, 753 A.2d 84, 103 (2000) (Cathell, J., concurring) ("[T]he Legislature is presumed to be aware of the common law as it stands at the time of the enactment and that the law is not intended to change the common law absent an express, specific declaration to do so."). To declare a deed void because of lack of notice could and would radically alter the protection of all bona fide purchasers in a subsequent chain of title.
Our conclusion is consistent with the Courts of Special Appeals' holding that the avowed failure to give the requisite notice of rescission rights may render the deed in question only voidable, and not void. We, though, differ from our intermediate appellate court in our application and result. While the Court of Special Appeals explored the issues surrounding Wells Fargo and U.S. Bank's acquisition of the mortgage, our emphasis under PHIFA goes to whether U.S. Bank was on notice at the time of the foreclosure sale of a potential defect in the chain of title, as well as whether the rescission notice was sufficient under the statute and whether rescission actually occurred. Because the Circuit Court did not make any findings on these issues and instead focused on whether Wells Fargo had notice at the time it loaned money and whether U.S. Bank had notice at the time it took assignment, we must remand the case for further findings and a determination under PHIFA as to whether the instant deed is voidable.
In remanding this case for further proceedings consistent with this opinion, Ms. Julian will have the burden of production and persuasion regarding whether her Notice of Rescission was effective, as against U.S. Bank's interests, under PHIFA, i.e., what the filing of her Notice of Rescission in the land records of Charles County put U.S. Bank on notice of, how that notice affected its status as a bona fide purchaser or bona fide lender, and whether the notice complied with the proper form as required by PHIFA. Should Ms. Julian make a prima facie showing on these matters, the burden of production and persuasion would shift to U.S. Bank to give it the opportunity to prove, unlike what it failed to show as regards the supersedeas bond question, that it nonetheless was a bona fide purchaser or bona fide lender for value. In this regard, U.S. Bank must adduce evidence supporting its apparent contentions that PHIFA does not apply to the transaction, that Ms. Julian was not entitled to file her Notice of Rescission under PHIFA, or that Ms. Julian's problems with the scam transaction should not be visited upon U.S. Bank as a bona fide purchaser or bona fide lender for value. Should U.S. Bank meet its burden, the case ends, but if U.S. Bank does not carry its burden, the burden of production and persuasion would shift back to Ms. Julian to show that her rescission was valid as against U.S. Bank.
JUDGMENT OF THE COURT OF SPECIAL APPEALS VACATED; CASE REMANDED TO THE COURT OF SPECIAL APPEALS WITH DIRECTIONS TO VACATE THE JUDGMENT OF THE CIRCUIT COURT AND TO REMAND THE CASE TO THE CIRCUIT COURT FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS *127 OPINION. COSTS IN THIS COURT AND IN THE COURT OF SPECIAL APPEALS TO BE PAID BY RESPONDENT.
Dissenting Opinion by ADKINS, J., which MURPHY, J., joins.
ADKINS, J., dissenting.
I respectfully dissent from the majority opinion because I think it is based upon two propositions that cannot be reconciled. On the one hand it holds, like the Court of Special Appeals ("CSA"), that U.S. Bank is a bona fide lender for value, as a matter of law. The Majority points to the absence of any evidence that U.S. Bank knew that there was a foreclosure consulting contract in place, within the meaning of PHIFA, when it paid value and took title to the Julian note and deed of trust.[1] On the other hand, the Majority departs from the CSA in "application and result[,]" because it resolves the appeal by focusing not on U.S. Bank's notice at the time of assignment, but on its notice at the time of the foreclosure saleof a potential defect in the chain of title created by Julian's rescission notice. Maj. op. at 677-78, 997 A.2d at 125-26. The Majority therefore vacates and remands because the Circuit Court "did not make any findings on these issues[.]" Id. at 678, 997 A.2d at 126. In short, the Majority's opinion means that (i) although at the time it was assigned the note and deed of trust, U.S. Bank was a bona fide lender for value without notice of a foreclosure consulting contract, (ii) it may lose this status when the loan goes into default because of a recently filed notice of rescission. I do not see how these two propositions can be harmonized.
A bona fide lender or a bona fide purchaser of real property takes free of defects or claims, and it does not lose this status once it is attained. Maintaining land records and adopting the notice system of priorities depends on this principle. Bona fide purchaser and bona fide lender status is defined by statute, Section 3-203 of the Real Property Article ("RP"), which provides:
§ 3-203 Subsequent deed; priority of deed first recorded
Every recorded deed or other instrument takes effect from its effective date as against the grantee of any deed executed and delivered subsequent to the effective date, unless the grantee of the subsequent deed has:
(1) Accepted delivery of the deed or other instrument:
(i) In good faith;
(ii) Without constructive notice under § 3-202; and
(iii) For a good and valuable consideration; and
(2) Recorded the deed first.
Maryland Code (1974, 2003 Repl. Vol., 2006 Suppl.), § 3-203 of the Real Property Article. A mortgage or deed of trust is considered a "deed" within the meaning of the statute.[2] The order of priority set forth in this statute means that, if U.S. Bank is a bona fide lender for value as the majority holds, the Notice of Rescission filed by Julian on August 23, 2007 will have *128 no impact on U.S. Bank's right to hold the Deed of Trust free and clear of Julian's claims.[3] This is why, unlike the majority, I believe U.S. Bank's knowledge at the time of the foreclosure sale of Julian's Notice of Rescission has no bearing on the resolution of this case.
Application of the priorities in RP Section 3-203 will determine the nature of the title that U.S. Bank is able to convey to any purchaser at a foreclosure sale. Thus, applying the Majority's holding that it was a bona fide lender as of the time it paid value for the Note and Deed of Trust, U.S. Bank would have the right to foreclose on default by the borrower and convey "all the title which the borrower had in the property at the time of the recording of the mortgage or deed of trust." RP § 7-105(a). Accordingly, the majority's holding about U.S. Bank's bona fide lender status collides with its mandate that the judgments of the CSA and the Circuit Court be vacated. It makes no difference whether the bank was on notice of a potential defect in the chain of title at the time of the foreclosure saleits rights as a bona fide lender or assignee were determined at the time the mortgage was executed. See Wash. Mut. Bank v. Homan, 186 Md.App. 372, 397, 974 A.2d 376, 391 (2009) (holding that knowledge at time of taking mortgage is determinative). Thus, U.S. Bank or any third party purchaser acquires title free of any cloud from the Notice of Rescission filed by Julian after the Deed of Trust. Cf. IA Constr. Corp. v. Carney, 104 Md.App. 378, 387-89, 656 A.2d 369, 374-75 (1995) (holding that a mechanic's lien does not take priority over rights acquired by bona fide mortgage lender for value when mortgage recorded before petition for mechanic's lien).
I would vacate the judgment of the CSA, with direction to vacate that of the Circuit Court, but for different reasons. I do not agree that U.S. Bank necessarily acquired bona fide lender status, as a matter of law, based on what we have in this record. Hence, I advocate for a remand, but with different instructions to the Circuit Court as to what facts need be determined. My departure from the Majority is based on PHIFA.
Julian contends that PHIFA significantly restricts when and how a lender may claim bona fide status because the well-publicized statute broadcasted the basic elements of a foreclosure rescue scam and specifies that a lender or its assignee is bona fide only if it takes without knowledge, not of actual fraud in the transaction, but that "a foreclosure consulting contract is in effect...." RP § 7-311(e). Section 7-311(e) provides:
A bona fide purchaser for value or bona fide lender for value who enters into a transaction with a homeowner or a foreclosure purchaser when a foreclosure consulting contract is in effect or during the period when a foreclosure reconveyance may be rescinded, without notice of these facts, receives good title to the property, free and clear of the right of the parties to the foreclosure consulting contract or the right of the homeowner to rescind the foreclosure reconveyance.
This language in PHIFA means that if a bona fide lender for value has notice that a foreclosure consulting contract is in effect or that the reconveyance rescission period is in effect, the lender is subject to defenses against the note and mortgage based on *129 PHIFA.[4] In my view, PHIFA elevates the level of inquiry that a mortgage lender should undertake when it makes a loan, or takes assignment of a note.
Here, we have a bank, Wells Fargo, which made a loan to Wilson in order to finance purchase of a property which had, less than four months earlier, been the subject of a foreclosure proceeding initiated by another bank, Ameriquest, against the then-property owner, Julian. The record reveals that Ameriquest's foreclosure proceeding was not completed, nor dismissed, at the time of Wells Fargo's loan and Julian's conveyance to Wilson. These facts are discernible from the county land records. There is no evidence in this case that Wells Fargo, when it made the mortgage loan, took any steps to verify that Wilson had any income to pay the loan. Indeed, the affidavit of indebtedness filed by the Trustees suggests that Wilson made, at most, one payment on the loan. The record does not reveal the date when U.S. Bank took assignment of the loan, or how much it paid for the loan. There is no evidence as to whether this loan was individually purchased, or assigned to U.S. Bank as part of a bulk transfer of mortgage loans.
In my view, given these facts, both Wells Fargo and U.S. Bank had the obligation, at the least, to make some limited inquiry about whether a loan foreclosure contract was in effect at the time of the Wells Fargo mortgage loan to Wilson. This inquiry might have been satisfied by an affidavit by a closing attorney, or even the new borrower that no foreclosure consultant was involved. Even verification that the new purchaser was living in the home, as the deed of trust required, and could afford the monthly loan payments may have been sufficient.[5] Wells Fargo and U.S. Bank may have taken these steps, but the record does not produce any evidence of that. We do know that the loan went into default almost immediately. The affidavit of indebtedness filed by the substitute trustees in this foreclosure showed that interest was owing from March 1, 2007, 60 days after the date for which interest was pre-paid at settlement. We also know that Wilson reported a fraud to Wells Fargo in March 2007, indicating that the bank had told her that her mortgage loan payment was late, when in fact she had no mortgage.
To prioritize the competing claims of the lenders and Julian, we should start with review of RP Section 7-311(e), and its use *130 of the familiar terms, "bona fide purchaser" and "bona fide lender." The elements required to prove this status are: "(a) That he [or she] must have given value for the property; (b) that he [or she] must have dealt in good faith with respect to the purchase; and (c) without notice or knowledge of any infirmity in the title of his [or her] vendor." People's Banking Co. v. Fid. & Deposit Co., 165 Md. 657, 664, 170 A. 544, 547 (1934); see also Homan, 186 Md.App. at 396, 974 A.2d at 390 ("Maryland cases have treated lenders who secure their interests with a mortgage or deed of trust as entitled to the protections available to bona fide purchasers for value, where such lenders were without notice of the mortgagor's fraudulent conduct.").
A party claiming the status of a bona fide purchaser or bona fide lender bears the burden of proving that she acted without notice and in good faith. See Albee Tomato, Inc. v. A.B. Shalom Produce Corp., 155 F.3d 612, 615 (2d Cir.1998); First Nat'l Bank of Cicero v. Lewco Sec. Corp., 860 F.2d 1407, 1411-12 (7th Cir. 1988); Gutekunst v. Cont'l Ins. Co., 486 F.2d 194, 195 (2d Cir.1973); Ins. Co. of N. America v. United States, 561 F. Supp. 106 (E.D.Pa.1983); Otten v. Marasco, 235 F. Supp. 794, 797 (S.D.N.Y.1964), aff'd, 353 F.2d 563 (2d Cir.1965); Strand v. Prince-Covey and Co., 534 P.2d 892, 894 (Utah 1975). But see Fid. & Cas. Co. of N.Y. v. Key Biscayne Bank, 501 F.2d 1322, 1325 & n. 3 (5th Cir.1974).
Although sometimes it is said that the party alleging fraud bears the burden to prove it against a bona fide purchaser, this will depend on the circumstances.[6] More importantly, under PHIFA, one need not prove fraud to invoke the protections of the statutemerely having notice of the mortgage consulting contract will suffice. This Court has not decided the question of who shall bear the burden to show that a lender is a bona fide lender for value within the meaning of PHIFA. I would decide that issue by allocating that burden to the lender because the lender "has readier access to knowledge about the fact in question." See Fleming James Jr., Burdens of Proof, 47 Va. L.Rev. 51, 58-61 (1961). Surely U.S. Bank has readier access to how it acquired the Note and Deed of Trust, and what it knew about Wilson's transaction with Wells Fargo, than Julian does. Therefore, I conclude, U.S. Bank has the burden to show that it meets the standard for a bona fide lender for value.
In my view, nothing in the record shows that Wells Fargo made the loan or U.S. Bank took assignment of the deed of trust having made any inquiry, no matter how limited, into any of the following questions: who arranged for the loan, what was the income of the borrower (Ms. Wilson), could the borrower afford the loan payments, was Ms. Wilson living in the house (which the deed of trust requires her to do), why was she purchasing the house, why had the foreclosure action against Julian remained open? Without answers to any of these questions, I think we must assume that *131 both Wells Fargo and U.S. Bank placed blinders on, the former in making the loan, and the latter in purchasing it. With the proliferation of mortgage lending scandals and the enactment of PHIFA, this intentional blindness simply is no longer enough, if it ever was, to meet the good faith element of establishing bona fide lender status. We must bear in mind that foreclosure proceedings are equitable proceedings in nature.
In conclusion, I would vacate the judgement of the CSA, and remand to it, with directions to remand to the Circuit Court for an evidentiary hearing, at which U.S. Bank must establish that it stands as a bona fide lender for value, without knowledge of the mortgage consulting contract, any other violation of PHIFA, or any other fraud or irregularity. Either U.S. Bank, or Wells Fargo, who originated the loan, and now services it for U.S. Bank, will possess the best information about the questions that are unanswered on this record. The fact that Wells Fargo, who originated the loan, also now services the loan for U.S. Bank may be of significance in making the determinations on remand.
Judge MURPHY authorizes me to state that he joins in the views expressed in this opinion.
NOTES
[1] A "supersedeas bond" is defined as "[a]n appellant's bond to stay execution on a judgment during the pendency of the appeal." Black's Law Dictionary 202 (9th ed. 2009). "Supersedeas" is defined as "[a] writ or bond that suspends a judgment creditor's power to levy execution, usu[ally] pending appeal." Black's Law Dictionary 1576 (9th ed. 2009).
[2] As part of the foreclosure action, U.S. Bank filed on August 27, 2007, an Order to Docket, a certified copy of the Deed of Trust, a Deed of Appointment of Substitute Trustees appointing Joseph V. Buonassissi, II, et al, as substitute trustees, "with full power and authority to execute all powers and duties vested in the Trustee under the provisions of the Deed of Trust . . . .," a Statement Under Oath as to Mortgage Debt and Military Affidavit, a certified copy of the Adjustable Rate/Balloon Note, and a Motion and Application to Authorize Substitute Trustees to Proceed with Decreased Bond.
[3] The Protection of Homeowners in Foreclosure Act, Sections 7-301 to 7-321 of the Real Property Article, Maryland Code (1974, 2003 Repl. Vol., 2006 Supp.) (PHIFA), was repealed in 2008, reenacted by Chapters 5 and 6 of the Maryland Laws of 2008, and recodified in Sections 7-301 to 7-325 of the Real Property Article, Maryland Code (1974, 2003 Repl. Vol., 2009 Supp.). The transaction at issue took place after PHIFA was enacted in 2005, but prior to the 2008 revisions, so that all references to the Act here are to the version in effect at the time of the transaction.
[4] The substitute trustees filed an "Affidavit of Notice in Compliance with Real Property Article Sections 7-105 and 14-126 and Rule 14-206(b)," an "Affidavit of Purchaser," by which Crystal Elkins acted "as agent for U.S. Bank National Association, as Trustee for CMLTI 2007-WFHE2, the principal who purchased the property which is subject matter of this proceeding for the sum of $480,000.00 at the Trustee's Sale . . . .," and a "Report of Sale and Affidavit of Fairness of Sale and Truth of Report of Sale."
[5] There is no lease agreement in the record as it was not admitted into evidence at the Exceptions Hearing.
[6] At the time Ms. Julian's exceptions were filed, a class action lawsuit had been filed in the U.S. District Court for the District of Maryland by three named homeowners on behalf of themselves and a class of others similarly situated against fourteen named defendants, alleging violations of the Federal Racketeer Influenced and Corrupt Organizations Act (RICO), the Federal Real Estate Settlement Procedures Act (RESPA), and the Maryland Protection of Homeowners in Foreclosure (PHIFA). Proctor, et al. v. Metropolitan Money Store, et al., Case No. 8:07-cv-01957-RWT (July 24, 2007). Ms. Julian was not a named plaintiff and Ms. Wilson was not a named defendant. The original class complaint was filed in June of 2007 in the Circuit Court for Prince George's County as Case No. CAL07-15383, but was voluntarily dismissed and re-filed in the U.S. District Court.
[7] Mr. Terlinsky was, presumably, referring to Section 7-105(c) of the Real Property Article (1974, 2003 Repl. Vol., 2006 Supp.), which requires that notice of the sale be given to a "holder of a subordinate interest" in the property, unless the recording of the subordinate interest is filed within thirty days of the foreclosure sale:
(5) The person authorized to make a sale in an action to foreclose a mortgage or deed of trust is not required to give notice to the holder of a subordinate mortgage, deed of trust, or other subordinate interest if:
(i) The existence of the mortgage, deed of trust, or other subordinate interest is not reasonably ascertainable;
(ii) The identity or address of the holder of the mortgage, deed of trust, or other subordinate interest is not reasonably ascertainable;
(iii) With respect to a recorded or filed subordinate mortgage, deed of trust, or other recorded or filed subordinate interest, the recordation or filing occurred after the later of:
1. 30 days before the day on which the foreclosure sale was actually held; and
2. The date the action to foreclose the mortgage or deed of trust was filed. . . .
[8] Rule 8-422(a)(1) provides that when a judgment is rendered against a party, the appellant "may stay the enforcement of any other civil judgment from which an appeal is taken by filing with the clerk of the lower court a supersedeas bond under Rule 8-423."
[9] Rule 8-423(b)(2) provides in relevant part:
When the judgment determines the disposition of the property in controversy (as in real actions, replevin, and actions to foreclose mortgages,) or when the property, or the proceeds of its sale, is in the custody of the lower court or the sheriff, the amount of the bond shall be the sum that will secure the amount recovered for the use and detention of the property, interest, costs, and damages for delay.
[10] The order for a supersedeas bond provided:
Upon consideration of PLAINTIFFS' MOTION FOR A SUPERSEDEAS BOND OR STRIKE THE APPEAL, and any opposition or response thereto, it is, therefore, this 16th day of September, 2008,
ORDERED that, as a condition for the continued prosecution of this appeal, Intervenor/Appellant shall provide a bond in the amount of $430,000 or such amount sufficient to secure that amount pursuant to Maryland Rule 8-423(b)(2), and that the Clerk of this Court shall accept such bond.
[11] We adopt the Court of Special Appeals' reasoning regarding inquiry notice and do not address this question, because we conclude that mere knowledge of an unconsummated foreclosure, followed by a conveyance of the property to a third party by the homeowner facing foreclosure, is not adequate to put a lender involved in the sale or an assignee of the lender on inquiry notice of a possible foreclosure scam transaction, such that the lender/assignee should act as a private Attorney General investigating consumer complaints.
[12] An assignment is a transfer of property or of some other right from one person (the assignor) to another (the assignee), which confers a complete and present right in the subject matter to the assignee, and privity of estate between the original parties ceases to exist. See La Belle Epoque, LLC v. Old Europe Antique Manor, LLC, 406 Md. 194, 211, 958 A.2d 269, 279 (2008); Italian Fisherman, Inc. v. Middlemas, 313 Md. 156, 163, 545 A.2d 1, 4 (1988).
[13] In People's Banking Co. v. Fidelity & Deposit Co., 165 Md. 657, 681, 170 A. 544, 554 (1934), we determined the bona fide status of an assignee of mortgages at the time of assignment:
With the information available to it, when it took the assignments, it is impossible to charge Fidelity Company with knowledge of the insolvency of the Trust Company. . . .
[14] At oral argument, counsel for U.S. Bank acknowledged that a Notice of Rescission had been filed by Ms. Julian, and was discovered prior to the foreclosure sale, but questioned whether the Notice was a valid document arguing that "a party cannot just file something in the land records and say, `I'm free.'"
[15] Our jurisprudence is clear that when a competent person signs a contract or disposes of his or her property in the absence of fraud, misrepresentation, mistake, undue influence, or fiduciary relations, the contract will be enforced:
[P]arties of sound mind and under no legal disabilities, and not occupying fiduciary relations, are left free to make such contracts as to them seem wise. The courts will not reform or rescind such contracts without the consent of the parties, when there is no fraud, misrepresentation, mistake, undue influence, or fiduciary relation shown to exist, or unless the equities are such that they should not be enforced.
Gardiner v. Gardiner, 200 Md. 233, 240, 88 A.2d 481, 484 (1952); Von Buchwaldt v. Schlens, 123 Md. 405, 91 A. 466 (1914). In Von Buchwaldt, we explained that in the context of deeds, when a party does not misapprehend the contents of a deed, there is an absence of fraud and undue influence, and no power of revocation was reserved, the party remains bound to the contract:
"[E]very person, whether man or woman, of sound and disposing mind, if under no legal disability, has the absolute right of making any disposition of his or her property that he or she may think proper, provided it does not interfere with the existing rights of third persons. If the disposition of property be fairly made by a competent person, though entirely voluntary and without consideration, it is perfectly valid, and cannot be rescinded simply because the Court may think it absurd or improvident that such a disposition should have been made."
Von Buchwaldt, 123 Md. at 410-11, 91 A. at 468, quoting Goodwin v. White, 59 Md. 503, 509 (1883). In the absence of a confidential relationship, such as between parent and child, the grantor of the deed assailing its validity bears the burden of proof. Id. at 410, 91 A. at 468. See also Highberger v. Stiffler, 21 Md. 338, 352-53 (1864) (holding that contracts and conveyances are voidable and will be set aside, except as to third parties, when a confidential relationship is abused).
[16] We have held that deeds of bargain and sale made by persons under the age of twenty-one (infants) are voidable and not void. See Sprecher v. Sprecher, 206 Md. 108, 113, 110 A.2d 509, 512 (1955) ("A conveyance made by an infant under twenty-one years of age is not void, but is voidable, if disaffirmed within a reasonable time after he or she attains the age of twenty-one years."); Monumental Building Ass'n v. Herman, 33 Md. 128, 132 (1870) (holding that when a contract is to the infant's prejudice, it is void, but where it may be for his or her benefit, "it is valid or voidable only at the election of the infant when of age," otherwise, "if it were absolutely void, the adult party contracting with him, would be equally discharged").
We also have held that when a debtor is "in failing or embarrassed circumstances," he has "the right to execute a deed of trust for the benefit of creditors," by dedicating all of his property and estate to the payment of his debts, even when suffering from mental infirmity (lunatics). See Riley v. Carter, 76 Md. 581, 595-96, 25 A. 667, 668-69 (1893) (holding that when the deed of bargain and sale of a lunatic "has been executed with all the usual formalities required by law, and duly enrolled, would in any case, like a feoffment in person, be only voidable and not void."), quoting Evans v. Horan, 52 Md. 602, 610-11 (1879) ("In England, . . . it appears to be well settled, as it is in this country, where the common law has not been abrogated by statutory enactments, that the feoffment of a lunatic or idiot, in person, is only voidable and not void.").
[17] The statute uses the spelling "instalment" rather than "installment," and we adopt the statute's spelling when quoting it in this opinion.
[18] Historically, land installment contracts were akin to leasing arrangements in which a "buyer" would make payments to a "vendor," but would face ejection and loss of equity should the buyer fail to fulfill the contract obligations. See Long v. Burson, 182 Md.App. 1, 17, 957 A.2d 173, 182-83 (2008). In an effort to remedy such harsh results, the General Assembly passed the Land Instalment Contract Act so that these contracts resembled traditional seller-financed transactions, thereby instilling the buyer with equitable ownership in the land and the process of foreclosure of the lien upon default rather than ejectment. Id. at 18-19, 957 A.2d at 183.
[19] In finding Hudson's contract voidable, we noted that he could and did waive whatever rights may have accrued to him by reason of the deficiencies of the contract, and that his willingness to receive a benefit while ignoring the contract's deficiencies was not without significance:
He received the benefit of the use and occupancy of the house for about a year and a half after the execution of [the first contract], and we think that he is now estopped to repudiate the contract and recover all of his payments and thus have the house rent-free for the period of his occupancy, whatever his rights might have been at any earlier stage.
Hudson v. Maryland State Hous. Co., 207 Md. 320, 330, 114 A.2d 421, 425 (1955). The issue of waiver, in the present context, is not before us and we express no opinion regarding its efficacy.
[20] PHIFA was modeled on a Minnesota statute regarding mortgage foreclosures, which passed in 2004, Minn.Stat. Ann. § 325N (West 2004).
[21] The preamble to PHIFA provides:
FOR the purpose of specifying the form and contents of certain contracts and documents; providing that a homeowner has the right to rescind certain contracts and transactions within a certain time; providing for the manner of giving notice of rescission; requiring a homeowner who rescinds certain contracts or transactions to repay certain funds with interest within a certain time; prohibiting foreclosure consultants and foreclosure purchasers from engaging in certain practices; requiring a homeowner to be provided with copies of certain documents; providing that certain provisions in certain documents are void; prohibiting certain documents from being recorded within a certain period; establishing certain rebuttable presumptions; requiring a certain audit account to be restated under certain circumstances; providing for the enforcement of this Act; providing penalties for violations of this Act; requiring a written notice of a foreclosure sale to contain a certain statement; providing for the effect of a certain order for resale in a foreclosure proceeding; exempting certain persons from certain provisions of this Act; providing for the effect and construction of certain provisions of this Act; requiring a certain notice to be sent to certain record owners; requiring the Consumer Protection Division of the Office of the Attorney General to maintain a list of certain nonprofit organizations and to provide certain information to certain homeowners; defining certain terms; making this Act an emergency measure; and generally relating to foreclosure.
[22] A "foreclosure purchaser" is "a person who acquires title or possession of a deed or other document to a residence in foreclosure as a result of a foreclosure reconveyance." Section 7-301(e).
[23] Section 7-306 ("Foreclosure consulting contract") provides in pertinent part:
(f) Void provisions.Any provision in a foreclosure consulting contract that attempts or purports to waive any of the rights specified in this title, consent to jurisdiction for litigation or choice of law in a state other than Maryland, consent to venue in a county other than the county in which the property is located, or impose any costs or filing fees greater than the fees required to file an action in a circuit court, is void.
Section 7-310 ("Foreclosure reconveyance") provides in pertinent part:
(f) Void provisions.Any provision in a foreclosure consulting contract or other agreement concerning a foreclosure reconveyance that attempts or purports to waive the homeowner's rights under this section, consent to jurisdiction for litigation or choice of law in a state other than Maryland, consent to venue in a county other than the county in which the property is located, or impose any costs or filing fees greater than the fees required to file an action in a circuit court, is void.
Section 7-314 ("Foreclosure surplus acquisition") provides in pertinent part:
(f) SameVoid provisions.Any provision in a contract that attempts or purports to waive any of the rights specified in this title, consent to jurisdiction or choice of law in a state other than Maryland, consent to venue in a county other than the county in which the property is located, or impose any costs or filing fees greater than the fees required to file an action in a circuit court, is void.
Section 7-318 ("Waiver of rights") provides in pertinent part:
(b) Void and unenforceable.Any waiver by a homeowner of the provisions of this subtitle is void and unenforceable as contrary to public policy.
[1] I use the terms "mortgage" and "deed of trust" interchangeably. See Alexander Gordon, Gordon On Maryland Foreclosures § 1.4 nn. 12-13 (4th ed. 2004).
[2] Section 1-101(c) of the Real Property Article "defines the term `deed' as used in the Real Property Article to include, among other things, `mortgage.' [Section 3-201] states that [e]very deed [or mortgage], when recorded, takes effect from its effective date as against the grantor, ... and every creditor of the grantor with or without notice.'" Angelos v. Md. Cas. Co., 38 Md.App. 265, 268, 380 A.2d 646, 648 (1977) (quotation marks and emphasis deleted).
[3] I assume that the assignment for value to U.S. Bank took place before Julian filed the Notice of Rescission. As the Substitute Trustees initiated the foreclosure proceedings before Julian filed her Notice of Rescission, the Deed of Trust must have been assigned to them before the Notice of Rescission was placed in the land records.
[4] As the majority noted, RP Sections 7-301 to 7-321 (PHIFA) were repealed in 2008, reenacted by Chapters 5 and 6 of the Maryland Laws of 2008, and recodified in RP Sections 7-301 to 7-325. Maj. op. at 648 n. 3, 997 A.2d at 108 n. 3. Before its rescission in 2008, PHIFA contained an express provision protecting bona fide purchasers for value and bona fide lenders for value from any cloud on the title resulting from a foreclosure rescue scam. RP Section 7-311(e) provided:
A bona fide purchaser for value or bona fide lender for value who enters into a transaction with a homeowner or a foreclosure purchaser when a foreclosure consulting contract is in effect or during the period when a foreclosure reconveyance may be rescinded, without notice of those facts, receives good title to the property, free and clear of the right of the parties to the foreclosure consulting contract or the right of the homeowner to rescind the foreclosure reconveyance.
Maryland Code (1974, 2003 Repl. Vol., 2006 Cum. Supp.). For whatever reason, the General Assembly did not include this provision, or any language similar to it, in the recodified PHIFA. See RP Sections 7-301 to 7-325 (1974, 2003 Repl. Vol., 2008 Cum. Supp.).
[5] The record suggests that it was Julian, not Wilson, who was living in the home, although the Deed of Trust required that the borrower live in the home. A verification of who was residing at the home would have led the bank right to Julian.
[6] See Berger v. Hi-Gear Tire & Auto Supply, Inc., 257 Md. 470, 475, 263 A.2d 507, 509-10 (1970) ("[T]he burden of proof is on the party assailing the transaction ... It is well established in this State that facts and circumstances may be such as to shift the burden to the grantee to establish the bona fides of the transaction."); Long v. Dixon, 201 Md. 321, 324, 93 A.2d 758, 759 (1953) ("[A]lthough he who alleges fraud generally must prove it, facts and circumstances of a conveyance, especially one between near relatives, may be such as to shift to one who claims to be a bona fide purchaser for value the burden of proving that he is.") (quotation marks omitted); Kline v. Inland Rubber Corp., 194 Md. 122, 137-38, 69 A.2d 774, 780 (1949) (holding burden to prove fraud shifted to family members to prove themselves bona fide mortgagees for value as against judgment creditor). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543326/ | 105 F.2d 806 (1939)
BOWIE
v.
BANKERS LIFE CO.
No. 1812.
Circuit Court of Appeals, Tenth Circuit.
June 21, 1939.
Rehearing Denied September 6, 1939.
Clarence L. Ireland, of Denver, Colo. (Ireland & Blackman and Harold D. Torgan, all of Denver, Colo., and Adams, Heckman & Raso, of Grand Junction, Colo., on the brief), for appellant.
Samuel M. January, of Denver, Colo. (G. Dexter Blount and Ronald V. Yegge, both of Denver, Colo., and J. P. Lorentzen and Dwight Brooke, both of Des Moines, Iowa, on the brief), for appellee.
Before PHILLIPS, BRATTON, and WILLIAMS, Circuit Judges.
BRATTON, Circuit Judge.
Bernice L. Bowie filed this suit against Bankers Life Company. The complaint contained two causes of action. The matters in controversy in the first were adjusted and it was dismissed. It was alleged in the second cause of action that as of June 28, 1928, the defendant issued its policy insuring the life of Alexander Bowie in the sum of $10,000; that the policy was payable to plaintiff as beneficiary; that it contained a provision for double indemnity in case of accidental death; that on November 25, 1937, an automobile being driven by the insured along a highway plunged from a bridge into a canal crossing the highway and the insured was drowned; that proof of death was submitted; and that the company had failed and refused to make payment of the amount due under the double indemnity provision.
*807 The answer interposed three separate affirmative defenses to the second cause of action but only the first is presented on this appeal. It alleged that the policy provided for the payment of an annual premium in advance but that the company would accept semi-annual or quarterly premiums in advance; that no payment should continue the policy in force beyond the date when the next payment was due; that default in payment of a premium would immediately render the policy null and void and all rights thereto forfeited to the company except as to certain rights relating to cash surrender value, paid-up value, and extended insurance, as set forth in the policy; that the agreement for double indemnity benefits provided that such benefits should be automatically cancelled upon default in the payment of any premium required under such agreement; that the insured during his lifetime paid the premiums in quarterly installments up to and including the installment of June 28, 1937; that he failed to pay the premium due September 28th; that the policy lapsed October 30th; and that due to such default and lapse, the agreement for double indemnity had become and was cancelled at the time of the death of the insured.
By second amended reply to such defense, it was alleged that the insured paid the quarterly premiums to September 28, 1937; that on or about November 1st, thereafter, he mailed his check to the agency of the company at Denver as payment of the quarterly premium then past due; that the agency received the check on November 2nd; that on the same day the agency wrote insured acknowledging receipt of the check but stating that it could not be accepted as it had been mailed after the expiration of the grace period, that if he would complete and return the application for reinstatement which was enclosed it would receive consideration, and that the check would be held for a few days subject to his order; that on November 3rd, insured executed the application for reinstatement and mailed it to the home office of the company at Des Moines; that on November 12th, the company wrote insured that it would be necessary for him to secure a statement from his attending physician relative to an illness said in his application for reinstatement to have been suffered during the previous August and September; that the insured received such letter in due course, and on November 18th, the physician wrote the company at its home office advising that the soreness in the left shoulder of the insured was inconsequential; that on November 24th, the company wrote insured requesting that he furnish a report of a medical examination to be conducted by another physician, named in the letter; and that such letter was received at the post office of the insured on the day following his death. Copies of the application for reinstatement and letters were attached to the reply and made a part of it. Insured stated in response to questions propounded in the application for reinstatement that a physician had treated him during August and September, preceding, for soreness in the left shoulder caused by infected wisdom teeth; that the attending physician gave him a complete physical examination including twenty-four hour urine and blood test; that the physician pronounced his heart, urine, and lungs satisfactory, and further pronounced his general condition satisfactory except for poisoning from the infected teeth which were removed; that the soreness then cleared up; and that he had fully recovered. After receiving the application making these disclosures, the company wrote the insured that it would be necessary to have a statement from his attending physician giving details in regard to his illness, and to have the doctor advise the nature and severity of symptoms, the results of any special examinations, whether in his opinion insured had completely recovered, and, if so, the approximate date of such recovery. The physician stated in his certificate, sent to the company, that he gave insured a careful and complete physical examination and found him to be in very good physical condition with the exception of one or two teeth, which he thought were in questionable condition; that he referred insured to a dentist and the teeth were removed; that insured had since been relieved of his complaint; that his symptoms were at no time severe; and that he did not have any temperature, redness, swelling, or other objective symptoms.
The company demurred to the reply on the ground that the matters pleaded therein were not sufficient to constitute a reply to the affirmative defense. The demurrer was sustained. Plaintiff refused to plead further and elected to stand upon the pleadings already filed. Judgment was entered for the company, and plaintiff appealed.
*808 The sole question for determination is whether the facts pleaded in the reply and admitted in the demurrer thereto, standing alone and without more, were sufficient in law to constitute a reinstatement of the policy. The policy bears an endorsement which provides that the contract shall be deemed to be made and payable in the State of Colorado. The law of that state is therefore determinative. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A. L.R. 1487; Ruhlin v. New York Life Ins. Co., 304 U.S. 202, 58 S.Ct. 860, 82 L.Ed. 1290; Rosenthal v. New York Life Ins. Co., 304 U.S. 263, 58 S.Ct. 874, 82 L.Ed. 1330.
The policy contains a provision that at any time within five years after default in payment of any premium, it may be reinstated upon presentation at the home office of the company of evidence of the insurability of the insured satisfactory to and approved by the company, and the payment of all premium arrears with interest thereon. This provision was one of substantial right to the insured. That right was to have the policy reinstated on the seasonable presentation of evidence of his insurability satisfactory to and approved by the company, together with payment of all premiums then in arrears plus interest thereon. Evidence of insurability satisfactory to the company, as therein used, means evidence which would satisfy a reasonable person experienced in the life insurance business that the insured was in an insurable condition. The company was obligated to treat and regard evidence of that kind as satisfactory. The contract further provides that the evidence shall be approved by the company, but such a provision does not authorize an insurance company to withhold approval of evidence which is satisfactory in substance and form. The company was not clothed with power to act arbitrarily or capriciously in determining whether the evidence of insurability was satisfactory or should be approved. It could not be governed by fancy or whim in deciding such matters. It was required to consider the evidence in the light of common sense and reason; and when viewed in that manner, it was the further duty of the company to regard it as satisfactory and approve it if no valid objection existed in respect to its form or substance. Where a policy contains a provision of this kind, where proof of insurability which is not open to valid objection as to form or substance is submitted within the authorized time, where payment of all premiums presently in arrears plus interest thereon is tendered, where the insured thus fully complies with the conditions of his contract, and where his death is wholly accidental and in no way involved in his proof of insurability, the policy is reinstated and the restoration relates back to the time of the submission of the application and the tender of the premiums. Officer v. New York Life Ins. Co., 73 Colo. 495, 216 P. 253.
The company places strong reliance upon the case of Colorado Life Co. v. Winegarner, 95 Colo. 261, 35 P.2d 860. But that case is distinguishable. There the policy provided in substance that it could be reinstated if these conditions were complied with while the insured was living and after due approval of the company, (a) due notice, satisfactory to the company, of the then insurability of the insured be duly furnished, and (b) due payment be made of all premiums in default with compound interest. The widow alleged that the insured sustained an accidental injury and that blood poisoning ensued which caused his death. The evidence showed that the application for reinstatement was approved on the day following the death of the insured; that the insured suffered an attack of acute yellow atrophy of the liver or malignant jaundice; that he was treated for such disease for almost two weeks shortly prior to his death, and was not cured; that such condition was directly coupled with the blood poisoning that was considered the cause of death; that it existed and was serious in every sense before the purported date of the application for reinstatement; and that death occurred only two days after the reinstatement-fee was mailed. The court said that one could not believe the company would have restored the policy had it known the facts in respect to the serious illness of the insured, and that for such reason the judgment for the beneficiary must be reversed. No comparable situation is presented here. The insured in this case did not withhold any material fact from the insurance company. Instead, he disclosed the soreness of his shoulder, explained the details, and stated that he had fully recovered. The company elected to request a statement from his attending physician as the additional information desired. It was furnished. The *809 physician stated in clear and unqualified language that he gave insured a careful and complete examination; that he found him in very good physical condition with the exception of one or two teeth which he thought were questionable; that they were extracted; that since then he had been relieved of his complaint; that his symptoms were at no time severe; and that he had neither temperature, redness, swelling, nor other objective symptoms. Since the question was determined below on demurrer to the reply, it must be assumed that the company did not have other or different information which was taken into consideration in determining whether the proof of insurability thus submitted was satisfactory. The facts differentiate the case from Colorado Life Co. v. Winegarner, supra, and bring it within the principles enunciated in Officer v. New York Life Ins. Co., supra.
The judgment is reversed and the cause remanded with directions to overrule the demurrer to the reply. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543327/ | 67 B.R. 985 (1986)
In re SCRANES, INC., Debtor.
Bankruptcy No. 583-174.
United States Bankruptcy Court, N.D. Ohio.
December 22, 1986.
Ronald Towne, Akron, Ohio, for Huntington Bank.
Jeffrey Heintz, Akron, Ohio, for debtor.
Stephen D. Umberger, Cleveland, Ohio, for SBA.
*986 FINDING AS TO MOTION OF DEBTOR TO COMPEL ACCEPTANCE OF PAYMENT
H.F. WHITE, Bankruptcy Judge.
I. BACKGROUND
On August 7, 1986 this court entered an order confirming a chapter 11 plan of reorganization of Scranes, Inc. which stated in part:
2.3 Class Three Claims. The Class Three Claims of The Huntington National Bank and the Small Business Administration arise out of a working capital loan secured by inventory and equipment of the Debtor, guaranteed by the Small Business Administration. The Small Business Administration has a claim against the Debtor and James L. Eltzroth and Freda C. Eltzroth on account of such guarantee. During the course of these proceedings, The Huntington National Bank has received from the Debtor the sum of Twenty-four Thousand Eight Hundred Eighty-nine and 4/100 Dollars ($24,889.04), which has been applied by The Huntington National Bank to the loan. Pursuant to Title 11, U.S.C. § 506, The Huntington National Bank will be deemed to have a secured claim in the amount of One Hundred Thirty Thousand Dollars ($130,000.00) and will be paid Seventy Thousand Dollars ($70,000.00) within sixty (60) days of confirmation and the balance within one year of confirmation. This payment to The Huntington National Bank will be deemed to be payment in full satisfaction of all obligations owed to The Huntington National Bank and to the Small Business Administration, whether by the Debtor, James L. Eltzroth, or Freda C. Eltzroth. The claim is deemed unimpaired because payments have been made to The Huntington National Bank during the course of these proceedings, and the Plan contemplates payment of the principal balance in full.
Plan of reorganization of Scranes, Inc. filed Apr. 10, 1986 at 3-4 (emphasis added). Class three claims were denominated unimpaired, and Huntington National Bank (herein "bank") did not object to the plan of reorganization.
On September 15, 1986 the attorney for the debtor, Mr. Heintz, sent a letter to the attorney for the bank, Mr. Towne, enclosing three checks payable to the bank on three accounts, with instructions as to the application of the funds to the accounts. Exhibit A to motion of Scranes, Inc. to compel acceptance by the Huntington National Bank and the Small Business Administration of $70,000 payment from the debtor pursuant to the debtor's confirmed plan of arrangement (herein "motion") filed September 25, 1986. The bank was instructed to apply the proceeds of the checks in the sum of $37,491.12 to payment in full of principal and interest due on Note No. 13133503 and to discharge the mortgage securing the note. Id. The bank was instructed to return the checks if it was unable to comply with the instructions of the letter. Id. The bank did not comply with the instructions and returned the checks to the debtor. The debtor then filed its motion.
On October 16, 1986 the bank filed its reply brief to the debtor's motion. At a hearing held the same day, the following documents were submitted as exhibits although not marked as such:
1. Continuing Guaranty/Unlimited of James L. Eltzroth and Freda C. Eltzroth to Huntington Banks for the obligations of Scranes, Inc. dated July 7, 1981;
2. Promissory note, dated March 3, 1982 (presumably Note No. 13133503) in the sum of $23,667.45 payable to the order of the bank with Scranes, Inc., James T. Eltzroth, and Freda C. Eltzroth as makers, secured by a mortgage on property located in the City of Wadsworth, County of Medina, and State of Ohio at 282 Westgate Avenue (herein "note for the sum of $23,667.45");
3. Mortgage deed dated March 3, 1982 in the sum of $23,667.45 with James L. Eltzroth and Freda C. Eltzroth as mortgagors, and the bank as mortgagee, for property located in the City of Wadsworth, *987 County of Medina, and State of Ohio at 282 Westgate Avenue and recorded that same day;
4. Promissory note dated August 28, 1981 in the sum of $76,900 payable to the order of the bank with Scranes, Inc. as maker;
5. Mortgage participation dated August 28, 1981 in the sum of $76,900 with James L. Eltzroth and Freda C. Eltzroth as mortgagors, and the bank as mortgagee, for the property located at 282 Westgate Avenue, Wadsworth, Ohio;
6. Small Business Administration (herein "SBA") Guaranty in the sum of $76,900 from James L. Eltzroth and Freda C. Eltzroth to the bank collateralized by accounts receivable, inventory, furniture and fixtures, second mortgage on real estate located at 282 Westgate Avenue, Wadsworth, Ohio, SBA Guaranty Form 148, assignment of an insurance policy for $100,000, and flood hazard verification; and
7. Letter dated August 29, 1986 from Karl Burkhardt, vice president of the bank, to Mr. Towne setting forth various notes, their collateralization, principal and interest;
8. Promissory note dated March 1, 1982 in the sum of $9,500 payable to the order of the bank with Scranes, Inc. and James L. Eltzroth as makers, secured by one action Scrap Grapple Serial No. 2279;
9. Promissory note dated March 1, 1982 in the sum of $11,000 payable to the order of the bank with Scranes, Inc. and James L. Eltzroth as makers, secured by Warner-Swasey Hopto Model No. H550 Excavator Serial No. 78112; and
10. Promissory note dated March 29, 1982 in the sum of $33,624.03 payable to the order of the bank with Scranes, Inc. and James L. Eltzroth as makers secured by assignment of equipment, Ohio magnets Load Star 48-inch magnet.
At the hearing on the motion the debtor's attorney argued that the confirmed chapter 11 plan of the debtor is res judicata and binds the bank according to its terms. The bank's attorney argued that the discharge of the obligation owed by the plan applied only as to the corporation, and that the "spreader clause" contained within the mortgage deed for Loan No. 13133503 has the effect of cross-collateralizing the bank for the other obligations owed by the Eltzroths to the bank. The debtor's attorney indicated he didn't "realize the bank was relying on this clause", but did not question its validity or effect.
II. ISSUES
(1) Whether the mortgage securing Loan No. 13133503 serves as additional security for the bank as to other obligations of the Eltzroths?
(2) Whether a confirmed chapter 11 plan which discharges the obligations of the debtor to its creditor can also discharge the obligations owed by third party guarantors to the same creditor?
III. DISCUSSION OF LAW
The language of the promissory note underlying Loan No. 13133503 indicates that it is secured by a mortgage on 282 Westgate Avenue, Wadsworth, Ohio, and that:
[i]f, at the time of the payment and discharge hereof, any of the undersigned shall be then directly or contingently liable to the Bank, as maker, indorser, surety or guarantor of any note, bill of exchange, or other instrument, or otherwise, then the Bank may continue to hold any collateral deposited hereunder after the payment of this note, and the Bank may thereafter exercise all rights with respect to said collateral granted herein even though this note shall have been surrendered to the undersigned.
Note for sum of $23,667.45. The mortgage is pledged as security for the payment of Loan No. 13133503 as well as "all other liabilities and obligations of the undersigned, and each of them, to the Bank, . . . now existing or hereafter arising, due or to become due." Id. at para. I.
At the time the note and mortgage deed for Loan No. 13133503 were executed, the Eltzroths' personal guarantee of the debts *988 of Scranes, Inc. was presumably in effect having been executed prior thereto, and presumably, since no evidence was offered as to this issue, two other promissory notes with Scranes, Inc. and Mr. Eltzroth as co-makers, and one promissory note from Scranes, Inc., SBA guaranty from the Eltzroths, and one mortgage from the Eltzroths to the bank, all relating to the same loan, were in effect.
Courts have referred to the type of clause at issue here not as a "spreader clause," but as a "dragnet clause." Courts have varied greatly in their decisions as to the effectiveness of the dragnet clause as securing all the indebtedness of the debtors to the mortgagee. Annotation, Debts Included in Provision of Mortgage Purporting to Cover All Future and Existing Debts (Dragnet Clause) Modern Status, 3 A.L.R. 4th 690 (1981). The bankruptcy court must look to Ohio law on this issue.
Mortgages securing future advances, so-called "open-end mortgages," are valid, and are a lien upon the premises as of the date of recordation even if the advances are later made, unless the mortgagee is not obligated to make such advance. Ohio Rev.Code.Ann. § 5301.232 (Page 1981). It must contain the phrase "open-end mortgage" at the beginning of the document. Id. This section of the Revised Code "does not prohibit the use of other types of mortgages permitted by law." Id. at § 5301.232(F).
The mortgage document at issue is not an open-end mortgage; it does not contain that phrase nor does it contain language that states that it secures future advances. Nor is it otherwise entitled to protection under Ohio common law. Where the mortgagee is not obligated to make future advances, a mortgage purporting to do so represents an offer by the mortgagor to provide the security of the mortgage for such advances if and when they are made. Second National Bank v. Boyle, 155 Ohio St. 482, 99 N.E.2d 474 (1951). The advance must be made by the mortgagee in reliance upon the security of the mortgage. Id. This position is based upon two rationales: (1) a mortgage is security for actual payment of money; and (2) subsequent encumbrancers would be prejudiced by the lack of notice furnished by a prior recorded mortgage securing advances which may or may not be made. Wayne Building & Loan Co. v. Yarborough, 11 Ohio St.2d 195, 216, 228 N.E.2d 841 (1967). If the mortgage evidences no obligation whatsoever to make future advances, advances made on such a mortgage months after the date of recordation are subordinate to the lien of an open-end mortgage recorded subsequent to that mortgage. Hunt Energy Co. v. United States (In re Hunt Energy Co.), 48 B.R. 472, 484 (Bankr.N.D.Ohio 1985) (good discussion of Ohio law on this issue).
The mortgage deed at issue securing Loan No. 13133503 contains no language purporting to secure future advances, or other obligations of the mortgagors, whether present or arising in the future. It is the promissory note which contains the language purporting to transfer an interest in certain real estate as security for payment of current and future obligations of the Eltzroths. No evidence was presented to the court, nor was it argued, that the bank was obligated to make future advances as required by state law, nor that the bank made subsequent loans in reliance upon this security.
However, the most fatal flaw to the bank's argument is that the instrument purporting to secure other current and future obligations is a promissory note, not a mortgage deed. A note contains none of the formalities required by Ohio law to transfer an interest in real estate such as acknowledgment of the signatures of the mortgagors and attestation by two witnesses. Ohio Rev.Code Ann. at § 5301.01. For the bank to claim that such language in a note is sufficient to convey mortgage interest in real estate which secured other current and future advances is contrary to the basic policy of record notice which is the underpinning of Ohio real estate and lien priority law. "It is within the power of the mortgagee to . . . obligate himself [so] that he will be accorded priority over intervening *989 encumbrancers" and to more fully secure his position. Yarborough, 11 Ohio St.2d at 218, 228 N.E.2d 841. The clause upon which the bank relies to secure other indebtedness of the Eltzroths to the bank is legally insufficient to do so.
Debtor's argument that its confirmed chapter 11 plan of reorganization which provides for discharge of "all obligations owed to [the bank] and to the [SBA] . . . by the Debtor, James L. Eltzroth, or Freda C. Eltzroth" discharges all obligations of the Eltzroths as guarantors or otherwise is also incorrect. The bank cites Old Phoenix National Bank v. Britts (In re Britts), 18 B.R. 203 (Bankr.N. D.Ohio 1982) as authority for the proposition that only a creditor who affirmatively adopts the proposed chapter 13 plan can be bound by its terms. It argues by analogy that since the bank was deemed to have assented to Scranes' chapter 11 plan by not objecting to it, this was not an "affirmative adoption"; therefore, the bank is not bound by the plan.
The bank places its reliance on the wrong case. In Union Carbide Corp. v. Newboles, 686 F.2d 593 (7th Cir.1982) the court was presented with the issue of whether a creditor's approval of a chapter 11 plan of arrangement under the Bankruptcy Act of 1898 discharges the obligation owed to that creditor by the debtor's guarantors where plan language purports to do so. In concluding that the creditor's approval did not discharge the obligation of the guarantors, the court stated that a discharge arises by operation of federal bankruptcy law, not by contractual assent of the creditors. Id. at 595. Even if the creditor assented, in many cases the approval or disapproval of one creditor has no effect on the proceeding. Id. Payment which effects a discharge is not consideration for any promise by the creditor, nor for one to release nonparty obligors. Id. Although decided under the Bankruptcy Act which contained a section specifically stating that the liability of a guarantor is not altered by the discharge of the bankrupt, the reasoning is persuasive.
The Ninth Circuit was presented with a similar issue to be decided under the Bankruptcy Code. Underhill v. Royal, 769 F.2d 1426 (9th Cir.1985). In drawing support from § 16 and other provisions of the Act the court stated that:
Generally, discharge of the principal debtor in bankruptcy will not discharge the liabilities of co-debtors or guarantors. 11 U.S.C. § 524(e) provides: "Except as provided in subsection (a)(3) of this section, discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt." This section of the 1978 Bankruptcy Reform Act was a reenactment of Section 16 of the 1898 Act . . .
. . . . .
When a bankruptcy court discharges the debtor, it does so by operation of the bankruptcy laws, not by consent of the creditors. . . .
[T]he bankruptcy court has no power to discharge the liabilities of a nondebtor pursuant to the consent of creditors as part of a reorganization plan. The broad language of § 524(e), limiting the scope of a discharge so that it "does not affect the liability of any other entity," encompasses this result.
Id. at 1432 (citations omitted).
The germ of an argument contained in the bank's posthearing brief finds fuller expression in circuit court decisions directly in point. However, as the clause contained in the note does not effect a conveyance of an interest in land, and even if it did, the failure of the bank to argue or show reliance on the security is fatal to its position, the law on this second issue is of no avail to the bank.
IV. CONCLUSION
The mortgage securing Loan No. 13133503 does not serve as additional security for the bank as to the other obligations of the Eltzroths, and the mortgage securing the payment of $23,667.45 given by the Eltzroths on their personal residence on March 3, 1982 should be released of *990 record. A confirmed chapter 11 plan does not discharge the obligations owed by third party guarantors to the same creditor, but full payment by the primary obligor/debtor of the debt through a confirmed chapter 11 plan does discharge the debt.
As the attorney for the debtor did not raise the correct and best arguments for his clients' position, and as the bank's argument did have some colorable merit, the attorney for the debtor will be denied payment of his fees as requested by the motion. The court will enter a separate order on this Finding directing the bank to execute a release of the mortgage as to the security pledged in Loan No. 13133503 by the Eltzroths. Pursuant to an order of this court entered October 17, 1986, the debtor was to again make a tender of $70,000 to the bank pursuant to the debtor's confirmed plan, and the bank was to credit the accounts as of the date of the original receipt of that sum. Part of the proceeds was to be tendered as payment in full of principal and interest due on Note No. 13133503. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543406/ | 67 B.R. 508 (1986)
In re Hazel Jean KELLY.
JIM WALTER HOMES, INC. and John H. Fox, III, as Trustee
v.
Hazel Jean KELLY and Archie Kelly and Harold J. Barkley, Jr.
Bankruptcy No. 8501668JC.
United States Bankruptcy Court, S.D. Mississippi, Jackson Division.
June 16, 1986.
*509 John H. Fox, III, Jackson, Miss., for plaintiff.
John M. Stevens, Jackson, Miss., for Hazel Jean Kelly, debtor.
OPINION ON "COMPLAINT FOR RELIEF FROM STAY, TO RECLAIM PROPERTY AND TO BAR DEBTOR FROM CLAIMING RIGHT OF REDEMPTION" FILED BY JIM WALTER HOMES, INC. AND JOHN H. FOX, III, AS TRUSTEE
EDWARD ELLINGTON, Bankruptcy Judge.
The Plaintiff, Jim Walter Homes, Inc., (Jim Walter Homes) is the holder of a promissory note which is secured by a deed of trust on a home and approximately one-half (½) acre of land. It is the beneficiary of the deed of trust and the other Plaintiff, John H. Fox, III, is the Trustee of the deed of trust. The Plaintiffs filed a complaint to have the Court direct the Chapter 13 Trustee, Harold J. Barkley, Jr., to abandon any interest he might have in the property; to obtain relief from the automatic stay provided by subparagraphs (3), (4) and (5) of § 362(a) of the Bankruptcy Code; and to be permitted to continue to foreclose on the aforesaid property. A separate Answer was filed by the Debtor, Hazel Jean Kelly, which contained certain affirmative matter. Jim Walter Homes then filed an Answer to the affirmative matter.
No answers or other pleadings were filed by the Defendant, Archie Kelly, or by the Chapter 13 Trustee, Harold J. Barkley, Jr.
*510 In the Complaint Jim Walter Homes claims that it is a creditor of Archie Kelly. It asserts that on December 31, 1977, Archie Kelly purchased the subject property from Mid-State Homes, Inc. (Mid-State) and gave a purchase money deed of trust to Mid-State. Beginning with the monthly payment due on June 5, 1985, the Defendant, Archie Kelly, defaulted on the indebtedness and on September 16, 1985, Mid-State assigned the note and deed of trust to Jim Walter Homes, who then had the trustee of the deed of trust commence foreclosure proceedings. On October 22, 1985, the Defendant, Archie Kelly, executed a quitclaim deed to his sister, Hazel Jean Kelly, who is the debtor in bankruptcy and a defendant herein. The Plaintiff asserts that it did not consent to the transfer of title to Hazel Jean Kelly; that it has not and will not acquiesce or accept Hazel Jean Kelly as a debtor to it; and, that it has no contractual relation with Hazel Jean Kelly. The Plaintiff further asserts that the transfer of title and subsequent filing of bankruptcy was an obvious attempt to circumvent the provisions of the deed of trust.
In her answer the Defendant and Debtor herein, Hazel Jean Kelly, admits most of the factual allegations as to the execution of the various deeds and deeds of trust and the filing of bankruptcy. However, she affirmatively claims that in 1977 she applied to Mid-State to buy the property in question but that an agent of Mid-State told her she could purchase, live in and pay for the property but that the note and deed of trust could not be put in her name "because she was a woman." Mid-State suggested that she secure a male to take legal possession of the subject property, but she was given express permission by Mid-State to reside in said property and to make the monthly payments. She further alleges that Archie Kelly never lived in the property or made any payments on the note. At all times the Plaintiff was aware of the arrangements and accepted her monthly payments for a period of some seven years.
She then asserts she is the legal owner of the subject property and obligor under the promissory note pursuant to the quit-claim deed. Thus, she is entitled to the benefits of the automatic stay provisions of Section 362 of the Bankruptcy Code.
Additionally, she asserts that she filed a Chapter 13 plan whereby the default which exists will be cured pursuant to Section 1322(b)(3) and (5); that the Plaintiff did not file an objection; and that the plan was confirmed on January 3, 1986.
In its answer to the affirmative matter, the Plaintiff denies that the Defendant was told that the creditor would not sell the property to her "because she was a woman"; denies that it gave express permission to Hazel Jean Kelly to live upon the property; and, otherwise denies the material allegations contained in the Defendant's affirmative matter.
In regard to the assertion of the Defendant that the Plaintiff had failed to object to the Chapter 13 plan of the Debtor, the Plaintiff replies that on November 20, 1985, it had filed its complaint for relief from the automatic stay to reclaim property and to bar Debtor from claiming any right of redemption; that such filing constituted an objection in writing to any proposed plan and proof of claim; and, that the filing preceded the due date for objections to the plan. It further alleges that its complaint was a preference filing pursuant to Section 362 and it should have been heard promptly, but that it was delayed by the Court because of a change in Bankruptcy Judges.
FINDING OF FACTS
By agreement of the parties, no testimony was taken and a written "Stipulation of Fact" and written briefs were submitted by the parties.
Both briefs filed herein contain numerous allegations of "fact" to explain and justify the position of the parties and, if true, give a broader view of the case. However, the Court has endeavored to base its findings solely on the narrative contained in the written "Stipulation of Fact" and the documents attached as exhibits and any matter admitted in the pleadings.
*511 It is not feasible to set forth the "Stipulation of Fact" in this Opinion because it has numerous documents attached to it as exhibits which are necessary to an understanding and determination of the facts but which are too voluminous to be included in their entirety.
The Court finds that in 1975 the Creditor built a house on a one-half (½) acre tract which is the subject of this litigation. This house and property is occupied by the Debtor and her children.
The property was conveyed from Archie Kelly and Robbie Mae Kelly to Andrew Lee Fuller and Stella Mae Fuller by deed dated July 7, 1975; notarized on November 24, 1975; and filed for record on January 9, 1976.
Andrew Lee Fuller and Stella Mae Fuller conveyed the property to Mid-State by deed dated December 17, 1977; notarized January 10, 1978; and filed for record January 24, 1978.
Mid-State conveyed the property to Archie Kelly, Jr., a single man, by deed dated February 2, 1978; notarized February 2, 1978; and filed for record on February 16, 1978. Contemporaneously, Archie Kelly, Jr. executed a purchase money deed of trust to Mid-State dated December 31, 1977; notarized January 6, 1978; and filed for record on February 16, 1978, which was the same date the deed was filed.
Ad valorem taxes have not been paid by the Grantor of the purchase money deed of trust, Archie Kelly, Jr., or anyone in his behalf for several years, but have been paid by the creditor as mortgagee. Insurance payments required of the Grantor by the deed of trust have also been paid by the creditor as mortgagee. Payments upon the indebtedness secured by the deed of trust were paid more or less regularly until June, 1985 when default occurred and no payments have been made upon the mortgage indebtedness since that time.
The deed of trust was assigned by Mid-State to Jim Walter Homes by assignment dated September 16, 1985.
Foreclosure proceedings were instituted by Jim Walter Homes against Archie Kelly, Jr. as defaulting debtor. The foreclosure sale was originally scheduled for October 29, 1985, and the requisite posting of notice of this proposed foreclosure sale was made and publication of notice in a newspaper was made on October 4, 11, 18 and 25, 1985.
The proposed foreclosure sale set for October 29, 1985, was not held and another foreclosure sale was scheduled for November 25, 1985. Again, the requisite posting of notice was made and publication of notice in a newspaper was made on November 1, 8, 15, and 22, 1985. Although it is not stated in the "Stipulation of Fact" apparently it was necessary to schedule a new foreclosure sale because the first foreclosure notice incorrectly described the property as being located in Rankin County, Mississippi when the property is actually located in the Second Judicial District of Hinds County, Mississippi.
In any event, after Jim Walter Homes had instituted the initial foreclosure sale which was scheduled to be held on October 29, 1985, Archie Kelly, Jr. purported to convey the property to Hazel Jean Kelly by a quitclaim deed dated, notarized and filed for record on October 15, 1985. This quitclaim deed contained an erroneous legal description of the property. Archie Kelly, Jr. then executed a second and corrected quitclaim deed to Hazel Jean Kelly dated, notarized and filed for record on October 22, 1985. It is stipulated that the creditor, Jim Walter Homes, did not participate in or consent to the transaction between Archie Kelly, Jr. and Hazel Jean Kelly as depicted by these two quitclaim deeds.
Three days after the execution and filing of the second and corrected quitclaim deed and four days before the date of the first proposed foreclosure set for October 29, 1985, Hazel Jean Kelly filed a petition for relief under Chapter 13 of the U.S. Bankruptcy Code on October 25, 1985. On November 4, 1985, the Debtor filed a proposed plan under Chapter 13. On November 20, 1985, Creditor filed a Complaint for relief *512 from the automatic stay provision of § 362 of the Code, to reclaim the property and to bar Hazel Jean Kelly from claiming any right of redemption. On December 19, 1985, this Court entered its Order extending the automatic stay and set the matter for preliminary and final hearing on January 28, 1986. On January 3, 1986, this Court entered its Order confirming the Chapter 13 plan filed by the Debtor.
There appears to be no dispute that the Debtor and her children have lived in the house for an extended period of time.
Hazel Jean Kelly claims that the house was purchased for her use and occupancy and she would testify that she has made all of the payments since 1977. She further claims that the title to the property was conveyed to Archie Kelly, Jr. upon the representation to her by an employee of the Creditor that the Creditor did not sell houses to women.
The Creditor denies this claim of the Debtor. In support of its contention that it has no such policy of refusing to sell houses to women, it has submitted a list of twenty-two single women to whom it has sold houses in the last two years.
The sales representative who supposedly was involved with the sale of the house to Archie Kelly, Jr. no longer works for the Creditor; has left the State of Mississippi; and, is unavailable as a witness. Also, no testimony was proffered for Archie Kelly, Jr. There is nothing in the record to substantiate the claim of Hazel Jean Kelly that the Creditor "did not sell houses to women" and therefore this bare assertion is rejected.
Hazel Jean Kelly further asserts that Archie Kelly, Jr. has no interest in the property and has had none since her occupancy in 1977. The creditor asserts that it has no information other than that Archie Kelly, Jr. is and has been title holder.
Robert Griffin is an employee of the Creditor and is assigned to the collection of the mortgage indebtedness involved. In his proffered testimony he testified that he became involved with the transaction in September, 1984. He had been on the premises on many occasions and asked to speak to Archie Kelly. He had been told in response that "He ain't here." He had never been told that Archie Kelly, Jr. did not live there. He did not know the relation between Archie Kelly, Jr. and Hazel Jean Kelly but he assumed that they were husband and wife. He had collected monies on several occasions from Hazel Jean Kelly to apply on Archie Kelly's debt.
In support of Jim Walter Homes' position that Archie Kelly, Jr. had continued to assert his ownership of the property the "Stipulation of Fact" contained as an exhibit a copy of a deed of trust from Archie Kelly, Jr. to Insul-Side, Inc., in the amount of $15,852.48 payable in 84 monthly installments of $188.72 dated October 27, 1984; notarized December 6, 1984 and filed for record December 20, 1984.
Assuming without deciding the correctness of the assertion of Hazel Jean Kelly that she had occupied the dwelling and made the payments on the indebtedness since it was conveyed to Archie Kelly, Jr., the Court finds nothing to support the proposition that the creditor knew or had notice that Hazel Jean Kelly or anyone other than Archie Kelly, Jr. claimed any ownership in the property, either legal or equitable; that the only debtor-creditor relationship that the creditor ever claimed, knew of or acknowledged was with Archie Kelly, Jr; and that the creditor never acquiesced or accepted Hazel Jean Kelly as a debtor.
The Court recognizes that the U.S. Court of Appeals for the Fifth Circuit has specifically held that a Chapter 13 debtor can cure a pre-petition acceleration of a mortgage debt based on a default in payments. Grubbs v. Houston First American Savings Association, 730 F.2d 236, 10 C.B.C.2d 549 (1984). See also In Re Taddeo, 685 F.2d 24 (2nd Cir.1982).
However, the Court in this case is faced with a problem similar to In Re Green, 42 B.R. 308 (Bkrtcy.1984). In that case John C. Dammann had acquired certain property in 1978 with a purchase money mortgage *513 and loan involving the Arlington Trust Company. The mortgage contained a "due on sale" clause. In 1979 Dammann inquired and was advised the bank did not allow transfers. Sometime between 1979 and 1981 Dammann entered into a written agreement with Steven and Christine Green which provided for purchase of the property by the Greens but under which the deed would not be recorded. Dammann died on January 30, 1983, and the debtors filed their deed on September 30, 1983. The debtors filed their Chapter 13 petition on November 23, 1983. The debtors contended that the automatic stay provisions of the Bankruptcy Code applied and that they should have been allowed to cure their prepetition default in their Chapter 13 plan.
The Bankruptcy Court acknowledged that the Second Circuit and the Fifth Circuit Courts of Appeals had specifically held that a Chapter 13 debtor can cure a pre-petition acceleration of a default in payments, but it then went on to say:
The problem in the present case, however, is that the mortgagor Dammann is the only party who is in default upon the mortgage debt, and Dammann's estate is not here itself asserting rights to "cure" under the provisions of Chapter 13. While no court apparently has yet passed upon this specific fact situation, the general interpretation of section 1322 of the Bankruptcy Code is to the effect that it has to do with curing of default conditions occurring in a debtor-creditor relationship. See Taddeo, supra, at pp. 26-27. Cf. In Re Andrews, 15 B.R. 717, 5 C.B.C.2d 955, 957 (D.S.C.1981).
The court accordingly concludes that the actual Chapter 13 debtors in this proceeding, the Greens, as a strict matter of law cannot cure in their Chapter 13 plan the acceleration of the mortgage debt in question as between Arlington and Dammann. Arlington therefore has a right to either immediate payment in full of its mortgage debt, or a right to proceed to foreclose the same free of any restriction by these Chapter 13 proceedings. Since the debtors admittedly cannot do the former, Arlington is entitled to the latter and should have leave from the automatic stay.
Similarly, in the case at bar, Archie Kelly, Jr. is the only party who is in default on the indebtedness to Jim Walter Homes which is secured by the deed of trust and Archie Kelly, Jr. is not here asserting rights to "cure" under the provisions of Chapter 13.
Likewise, this Court concludes that Hazel Jean Kelly cannot cure in her Chapter 13 plan the pre-petition defaults of Archie Kelly, Jr. and that Jim Walter Homes is entitled to have any defaults under the deed of trust cured or it should be allowed to proceed to foreclose.
The Court now considers the argument of the Debtor that Jim Walter Homes did not file any objection to her proposed Chapter 13 which provided for curing of any pre-petition defaults of the indebtedness between Archie Kelly, Jr. and the creditor; that the Chapter 13 was confirmed on January 3, 1986; and, therefore Jim Walter Homes is now precluded from seeking to have the automatic stay removed.
Chapter 13 of the Bankruptcy Code is concerned with the adjustments of debts of an individual with regular income. The whole Chapter presupposes a debtor-creditor relationship.
Section 101(9)(A) of the Code defines creditor, in part, as follows:
(9) "creditor" means
(A) entity that has a claim against the debtor that arose at the time of or before the order for relief concerning the debtor;
Section 101(4)(A) of the Code defines a claim, in part, as follows:
(4) "claim" means
(A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, *514 matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured
Sections 1321 through 1326 of the Code mandate the debtor to file a plan; provide for the contents of the plan; for a confirmation hearing; that the plan shall be confirmed if all requisite conditions are met; and for payments to and by the trustee.
Section 1327 speaks to the effect of confirmation of the plan. Section 1327(a) specifically provides:
(a) The provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan. (Emphasis added)
Thus, it seems clear that according to Section 1327(a) a confirmed plan is only binding on the creditors of a debtor.
In the present case, the Court concludes that since no debtor-creditor relationship existed between Hazel Jean Kelly and Jim Walter Homes, then Jim Walter Homes was not and is not bound by any confirmed Chapter 13 plan of Hazel Jean Kelly; that it was not compelled to file any objection to her plan since it would not and could not be affected by it.
CONCLUSION
For all of the reasons set forth, I find that the automatic stay provided by § 362 of the Bankruptcy Code should be terminated as it applies to Jim Walter Homes and Jim Walter Homes should be allowed to proceed to foreclose. The Court will enter an order terminating any automatic stay with regard to Jim Walter Homes, effective July 15, 1986.
Counsel for Jim Walter Homes shall prepare an order consistent with this Opinion, submit it to counsel opposite for reading and comment, and then submit it to the Court for approval and entry. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543632/ | 55 B.R. 17 (1985)
In re John PALAZZOLO, Debtor.
In re Joan PALAZZOLO, Debtor.
Bankruptcy Nos. 085-50142-17, 085-50147-17.
United States Bankruptcy Court, E.D. New York.
May 31, 1985.
Philip Irwin Aaron, Jericho, N.Y., for creditor.
Maurice Abrahams, New City, N.Y., for debtor.
Marianne De Rosa, Mineola, N.Y., Trustee.
DECISION AND ORDER
ROBERT JOHN HALL, Bankruptcy Judge.
This matter came to be considered on the motion of Loretta Galbo, the sole creditor in these two related chapter 13 cases for an order denying confirmation of the debtors' proposed plans, and for dismissal or conversion of these cases pursuant to 11 U.S.C. § 1307(c). The court finds for the creditor and hereby denies confirmation of the debtors' proposed plans and orders that the debtors' cases be dismissed.
STATEMENT OF FACTS
Debtors in these cases are brother and sister-in-law who together own a parcel of real property located at 11 Arlene Court in Hauppauge, New York. Their chapter 13 plans propose to change the terms of a mortgage upon that property.
On or about February 19, 1981, the debtors' corporation, "Janine Pizzeria, Inc." borrowed $60,500 from the creditor, and the debtors secured the loan with a mortgage on their real property. The loan, plus interest of 24% per annum, was due within eighteen (18) months (on or about August 8, 1982). No payments were made prior to the filing of these bankruptcies on February 25, 1985. The subject real property was the principal residence of the debtors at the time the mortgage was agreed upon, *18 and at the time the debtors filed their petitions.[1]
DISCUSSION
The issue before the court is whether a debtor can use a chapter 13 petition to delay payment of a residential mortgage that has matured prior to the filing of the petition.
11 U.S.C. § 1322(b)(2) states that a chapter 13 plan may not "modify" the rights of a creditor secured only by the debtor's principal residence. This does not mean, however, that defaults on residential mortgages cannot be "cured". Indeed, 11 U.S.C. § 1322(b)(5) allows defaults to be cured so long as the cure is made before the last payment from the original debt schedule falls due. Debtors are permitted, therefore, to create new payment schedules within their plans to provide for the curing of mortgage defaults as long as the new schedule does not extend the final due date of the mortgage. See In re Seidel, 752 F.2d 1382, 12 B.C.D. 1016, 1017 (9th Cir. 1985); In re Maloney, 36 B.R. 876, 877-78 (Bankr.D.N.H.1984). The Seidel court explained that the restriction upon modification found in section 1322(b)(2) was enacted in order to protect home lenders, and that this specific legislative intent overrides the general legislative "purpose" of allowing a debtor to preserve his home. 752 F.2d 1382, 12 B.C.D. at 1018.
In support of their plan, debtors have cited DiPierro v. Taddeo (In re Taddeo), 685 F.2d 24 (2d Cir.1982), in which the Second Circuit approved the "deacceleration" of mortgage debt. In Taddeo, the court permitted the debtor's plan to provide for the payment of mortgage defaults, despite the fact that the mortgagee had accelerated the entire debt by reason of the debtor's default in payment. 685 F.2d at 26. The court held that the "curing" of defaults under section 1322(b)(5) included the power to "deaccelerate" the mortgage and "reinstate its original payment schedule." Id. In the instant case, the payment schedule expired before the debtors even filed a bankruptcy petition, and thus the power to deaccelerate and reinstate the original payment schedule approved in Taddeo is inapplicable. This court holds that to permit the debtors to create a five year mortgage payable into 1990, out of an eighteen month mortgage which fell due by its own terms nearly three years ago, would constitute a modification of the creditor's secured claim prohibited by 11 U.S.C. § 1322(b)(2). See Maloney, 36 B.R. at 877-78.
In summary, the court holds that the plain meaning of 11 U.S.C. § 1322(b) expresses Congress' intent to protect mortgage lenders. The debtors cannot, therefore, modify the creditor's rights by extending the time to pay their mortgage as proposed in their chapter 13 plans. The debtors have failed to propose a plan which complies with chapter 13. Moreover, it is clear that the debtors cannot propose plans which will both provide for the payment of the debt owed to the debtor's sole creditor and comply with the requirements of chapter 13. Accordingly, the court hereby dismisses the debtors' chapter 13 cases pursuant to 11 U.S.C. § 1307(c).
So Ordered.
NOTES
[1] On June 18, 1984, a judgement of foreclosure and sale was entered in the Supreme Court of the County of Suffolk under Index Number 84-3718. Subsequently, three ex parte orders to show cause, together with temporary stays, were issued by the state court. Upon exhaustion of these state court proceedings the debtors filed bankruptcy petitions automatically staying the foreclosure and sale. On March 7, 1985, Judge Radoyovich vacated the automatic stay upon creditor's motion. Subsequently, Judge Radoyovich denied a stay of his order pending appeal. On April 24, 1985, Judge Costantino of the United States District Court granted a stay of foreclosure and sale pending the determination of the debtors' appeal from the order vacating the automatic stay. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543635/ | 55 B.R. 763 (1985)
In re Robert L. STREET, Debtor(s).
Robert L. STREET, Appellant,
v.
Dora LAWSON, Appellee.
Adv. No. MT 85-1011-AsME, Bankruptcy No. 282-00305.
United States Bankruptcy Appellate Panels of the Ninth Circuit.
Argued October 18, 1985.
Decided November 25, 1985.
Harold V. Dye, Milodragovich, Dale & Dye, P.C., Missoula, Mont., for appellant.
Edward A. Murphy, Datsopoulos, MacDonald & Lind, Missoula, Mont., for appellee.
Before ASHLAND, MEYERS and ELLIOTT, Bankruptcy Judges.
OPINION
ASHLAND, Bankruptcy Judge:
Debtor Robert Street appeals from an order denying confirmation of an amended Chapter 13 plan. We reverse.
Street originally commenced this case under Chapter 7 of the Bankruptcy Code (Title 11 U.S.C.). On May 24, 1984 the bankruptcy judge entered judgment in favor of Dora Lawson for $30,000 and determined the debt nondischargeable under Bankruptcy Code § 523(a)(4). Street converted the case to one under Chapter 13 on June 25, 1984.
Statement of Facts
Street is a self-employed management consultant and grossed on average $2,503 per month. Street's disposable monthly income is $773 of which he proposed to pay $500 into the plan.
Street's first plan proposed a classification among unsecured creditors whereby Dora Lawson would receive all payments to be made under the plan other than those required to pay priority claims. This would result in Mrs. Lawson receiving approximately 54% of her claim while other unsecured creditors would receive nothing. The basis for the classification was the judgment of nondischargeability that had been rendered in favor of Mrs. Lawson while the case was under Chapter 7. Confirmation of this plan was denied.
*764 Street obtained leave to file an amended plan which is the subject of this appeal. The amended plan classified all unsecured creditors as one class and would result in a payout to all unsecured creditors of approximately 28%.
Dora Lawson objected to the amended plan on the basis that it had not been proposed in good faith.
On March 22, 1985 the court rejected the proposed Chapter 13 plan for three reasons. First, the court found that the debtor lacked good faith in proposing to seek to discharge an otherwise nondischargeable debt through the use of Chapter 13. Second, it was "manipulative of the Bankruptcy Code" for Street to convert a case from a Chapter 7 to a Chapter 13 after Lawson's exception to discharge was entered. Third, after considering various unsecured creditors listed as "unknown" in the original schedules, the court found that it was "virtually impossible" to fix "the percentage to be paid" to unsecured creditors.
Issues
I. Whether it is bad faith to seek to discharge an otherwise nondischargeable debt through Chapter 13?
II. Whether the conversion of a Chapter 7 case to a Chapter 13 case after a judgment of nondischargeability is entered constitutes manipulation of the Bankruptcy Code?
III. Whether it was error for the Bankruptcy Court to consider untimely and unfiled claims in rejecting debtor's Chapter 13 plan?
Discussion
I. Whether it is bad faith to seek to discharge otherwise nondischargeable debts through Chapter 13
A Chapter 13 plan must be proposed in good faith. The Bankruptcy Code does not define good faith and the Congressional history sheds little light on its meaning. In re Goeb, 675 F.2d 1386, 1390 (9th Cir. 1982). The courts take different approaches to the good faith standard. Some hold that it requires that the unsecured creditors receive more than in Chapter 7. Others have held that the plan must provide for substantial repayment. In re Hurd, 4 B.R. 551 (W.D.Mich.1980). Others hold that the good faith standard requires consideration of all factors affecting the plan and that the amount of payment, by itself is not controlling. Goeb at 1390.
Goeb noted the paucity of any Congressional history on the definition of good faith and rejected what it termed as inflexible a requirement relating to the percentage of repayment on claims. The court cited American United Mutual Ins. Co. v. City of Avon Park, 311 U.S. 138, 61 S.Ct. 157, 85 L.Ed. 91 (1940), for a good faith requirement in Chapter IX of the Bankruptcy Act and concluded that the scope of the court's inquiry must be broad. In general the court must focus on the equity and good conscience of the debtor. The court must be guided by equitable doctrines and must consider such things as the public interest. American United v. Avon Park at 140, 61 S.Ct. at 159. Specifically, with respect to Chapter 13 the court must inquire into whether the debtor has misrepresented facts in his plan, unfairly manipulated the Bankruptcy Code, or otherwise proposed his Chapter 13 plan in an inequitable manner. While substantial repayment is a factor, the court must consider all other factors that relate to the equities, and the decision must be made on a case by case basis, Goeb at 1390.
The appellee contends that the debtor acted in bad faith by seeking to discharge otherwise nondischargeable debts through Chapter 13. In the case of Dora Lawson, the court has already determined that fraud was committed and that the debt was nondischargeable under the Chapter 7 proceeding.
In re Slade, 15 B.R. 910 (9th Cir. BAP 1981), specifically rejected the argument that proceeding with a Chapter 13 in order to discharge debts otherwise nondischargeable constitutes bad faith. Slade, affirmed the confirmation of a Chapter 13 plan which proposed payments of $135 per *765 month for three years and resulted in less than five percent payout to unsecured creditors. A substantial portion of the debt owing in Slade was incurred from the embezzlement of funds by Slade while working as an employee of Bank of America.
[T]he fact that the code specifically allows the discharge of debts under Chapter 13 which are not dischargeable under Chapter 7 would preclude a finding of bad faith based merely upon the existence of such debt among the liabilities of an erstwhile Chapter 13 debtor.
* * * * * *
[T]he fact that a debtor's plan represents his best efforts is a significant indication of good faith on his part. Absent any showing of a willful attempt to misuse Chapter 13 in defraud of creditors, best effort plans should normally satisfy the good faith requirements of 11 U.S.C. § 1325(a)(3).
Slade at 912.
In both Slade and this case, debtors faced with otherwise nondischargeable debts are attempting to work out their debt by payments representing their reasonable best efforts over the statutory three year period.
We are not saying that it is an abuse of discretion for a bankruptcy judge to deny confirmation of a plan that discharges an otherwise nondischargeable debt in all chapter 13 cases. Seeking to discharge an otherwise nondischargeable debt is only one factor to be considered in determining whether the plan was proposed in good faith.
II. Whether conversion of a Chapter 7 case to Chapter 13 after a judgment of nondischargeability is entered constitutes a manipulation of the Bankruptcy Code
Bankruptcy Code § 706(a) provides:
The debtor may convert a case under this chapter to a case under Chapter 11 or 13 of this title at any time, if the case has not been converted under § 1112 or 1307 of this title. Any waiver of the right to convert a case under this subsection is unenforceable.
Both the House and Senate reports to the Bankruptcy Reform Act speak of this subsection as giving the debtor an "absolute right" to convert. H.Rept. No. 95-595 to accompany H.R. 8200, 95th Cong., 1st Sess. (1977), p. 380; S.Rept. No. 95-989 to accompany S. 2266, 95th Cong., 2nd Sess. (1978) (94), U.S.Code Cong. & Admin.News 1978, p. 5787.
In re Jennings, 31 B.R. 378 (Bkrcy.S.D. Ohio 1983), addressed the right to convert to a Chapter 13 proceeding. This case involved a situation where a debtor converted from Chapter 7 to Chapter 13 because of actions, including failure to schedule assets, that jeopardized his general discharge. The court stated:
The question of whether this court has any discretion to prevent the debtor from converting his Chapter 7 case to Chapter 13 gives us greater pause. The language of § 706 clearly forbids any waiver of debtor's right to convert, and no limitation on that right can be read into that provision. As was noted in the House Report No. 95-595, 9th Cong., 1st Sess. 380 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5797, 6336: "The policy of the provision is that the debtor should always be given the opportunity to repay his debts."
* * * * * *
As is evident from § 1328 which provides for the discharge even of certain nondischargeable debts, Congress intended that no limitations be imposed on debtors who wish to repay their debts, regardless of the circumstances under which those debts were incurred.
Jennings at 380.
A conversion from Chapter 7 to Chapter 13 following an adverse decision on a dischargeability action does not render the Chapter 13 "manipulation of the bankruptcy code" as stated by the bankruptcy judge.
*766 III. Whether the court erred in considering untimely and unfiled claims in rejecting debtor's amended plan
Bankruptcy Rule 3002(c) provides that in any "Chapter 7 liquidation or Chapter 13 individual's debt adjustment case, a proof of claim shall be filed within 90 days of the first date set for the meeting of creditors called pursuant to § 341(a) of the Code. . . ." Rule 3002(c) is intended to provide an absolute bar to claims filed after 90 days after the § 341 meeting. Under prior law, "the weight of authority" treated the bar date as "mandatory and immutable" and as a "statute of limitations not subject to extension by the bankruptcy court." Wilkens v. Simon Bros., Inc., 731 F.2d 462, 464 (7th Cir.1984).
The issue before us is not whether a late filed claim is permissible. We are only concerned with the timely filed claims that were before the bankruptcy judge at the time of the confirmation hearing.
Street's § 341(a) meeting under Chapter 13 was held October 5, 1984. By the terms of the bankruptcy court order setting the § 341(a) meeting and Bankruptcy Rule 3002, the bar date for filing proofs of claim was fixed as January 4, 1985. The confirmation hearing was held on February 20, 1985.
At the confirmation hearing, the bankruptcy judge considered a claim by Manidell Bandy. This claim was not filed until February 4, 1985, 40 days late. The creditors matrix established that Ms Bandy was on the matrix and received notice of the 341(a) meeting under Chapter 7, the conversion to Chapter 13, and the notice of the Chapter 13 § 341(a) meeting which later notice also advised of the Chapter 13 bar date for filing proofs of claim.
Since the hearing was held after the bar date, it was possible for the court to determine the amount of all claims against the debtor at the confirmation hearing.
Conclusion
The mere fact that Street utilized the discharge provisions of Chapter 13 does not establish bad faith. A conversion of the case from Chapter 7 to Chapter 13 after an exception to discharge was not manipulative of the Bankruptcy Code. Because the bar date had expired, the court could have determined the payout percentage under the plan.
Reversed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3042281/ | United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
Nos. 05-3693, 06-2054/2055/2056/2564
___________
Jimmy Shane Cantrell, *
*
Appellant, *
* Appeals from the United States
v. * District Court for the Eastern
* District of Arkansas.
Grant Harris, Warden, Varner Unit, *
ADC; Larry Norris, Director, * [UNPUBLISHED]
Arkansas Department of Correction; *
G. Moore, Captain, Varner Unit, ADC; *
John Doe; Marshall Gender, Varner *
Unit, ADC; Teresa Conrad, Ms., Varner *
Unit, ADC; Janice Metcalf, Varner Unit,*
ADC; Tamara Hammock, Ms., Varner *
Unit, ADC; Tim Moncrief, Assistant *
Warden, Varner Unit, ADC; James, *
Mr., Varner Unit, ADC; Judy *
Hathaway, Grievance Office, Varner *
Unit, ADC; Thomas Hurst, *
*
Appellees. *
___________
Submitted: March 29, 2007
Filed: April 10, 2007
___________
Before RILEY, HANSEN, and MELLOY, Circuit Judges.
___________
PER CURIAM.
In these five consolidated appeals, Arkansas inmate Jimmy Shane Cantrell
(Cantrell) appeals several of the district court’s1 prejudgment orders and the ultimate
dismissal order entered after an evidentiary hearing in his 42 U.S.C. § 1983 action.
He also moves for appointment of counsel. After a de novo review, see Randle v.
Parker, 48 F.3d 301, 303 (8th Cir. 1995) (standard of review), we conclude the
dismissal of Cantrell’s complaint was proper. We further conclude the other orders
resulted in no reversible error.
Accordingly, we affirm in all five appeals. See 8th Cir. R. 47B. We deny the
pending motions for counsel.
______________________________
1
The Honorable J. Leon Holmes, Chief Judge, United States District Court for
the Eastern District of Arkansas, as to some orders adopting the report and
recommendations of the Honorable H. David Young, United States Magistrate Judge
for the Eastern District of Arkansas.
-2- | 01-03-2023 | 10-13-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1919514/ | 106 B.R. 748 (1989)
In re Dennis John EASTER and Catherine Easter, Debtors.
In re Gary S. KRAMER and Myra J. Kramer, Debtors.
Bankruptcy Nos. 89-32855-BKC-TCB, 89-32856-BKC-TCB.
United States Bankruptcy Court, S.D. Florida.
September 19, 1989.
Schantz, Schatzman & Aaronson P.A., Shelly Berkowitz for Lawrence M. Schantz, Miami, Fla., for debtors.
Irving E. Gennet, Boca Raton, Trustee.
Robert C. Furr, Boca Raton, Fla., for Trustee.
ORDER DENYING DEBTORS' AMENDED MOTIONS FOR REHEARING
THOMAS C. BRITTON, Chief Judge.
The debtors in these two similar but separate bankruptcies have amended their original motions (CP44; CP49) for rehearing, which were addressed to the August 17 Order on Review of Fees for Debtors' Attorney. 105 B.R. 724.
*749 That Order required that $4,000 of the prepetition fee paid counsel in each case be disgorged and paid to the trustee.
The debtors do not dispute that the sum in question should be refunded, but claim that it should be refunded to them, rather than the trustee.
The contention is that the prepetition fees were paid from prepaid salary received by each debtor husband for personal services to be performed subsequently. It is argued that the services were subsequently performed and not otherwise compensated.
Florida Statute § 222.11 prohibits attachment or garnishment:
"to attach or delay the payment of any money or other thing due to any person who is the head of a family residing in this State, when the money or other thing is due for the personal labor or services of such person."
The "facts" asserted by the debtors have not been controverted before me, and for the purposes of this motion, I accept them as admitted.
However, I do not agree that the disgorgement payment to the trustee offends the Florida exemption statute.
As I see it, when these prepaid wages were received and used by the recipients to pay their attorneys, the money ceased to be exempt from the process of this or any other court. The exemption from court process provided by the Florida statute was not, as I interpret the statute, intended to apply to advances on future earnings. Section 222.11 applies only to wages which are owing, Financial & Inv. Planning, Inc. v. Lieberman, 452 So. 2d 1022 (Fla.Dist.Ct.App.1984), or paid and segregated in a bank account, In re McCafferty, 81 B.R. 99 (Bankr.M.D.Fla.1987).
The interpretation of the statutory provision urged by the debtors would provide an obvious and uncontrollable invitation to abuse. If it had been intended by the Florida legislature, that intent would have been revealed more expressly than is provided in this statute. I am convinced that the statute was designed to and is applicable only to monies clearly identified as due or having been paid for personal services furnished by debtors, rather than prepaid services or advances on future, unearned wages.
The sole authority cited by the debtors for the proposition that wages should be exempt regardless of when the wage earner collects them, Family Clothing Corp. v. Richardson,[1] 25 Tenn.App. 195, 154 S.W.2d 795 (1941), is clearly distinguishable. The decision applies to a Tennessee wage exemption calculated on a per month basis. The wages at issue there were due and paid as earned, not prepaid for future services.
For that reason, the amended motion is denied.
DONE and ORDERED.
NOTES
[1] The reference to the case name cited in the debtors' memoranda, Jackson v. Jackson is an obvious error, referring to the next reported case at page 797 in the S.W. Reporter. The case attached to the memoranda by the debtors which contains the relevant language and statutory interpretation is Family Clothing Corp. at page 795, 797. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919551/ | 91 B.R. 570 (1988)
In re Stephen F. CLARK and Lori B. Clark, Debtors.
Bankruptcy No. 87-B-14668-M.
United States Bankruptcy Court, D. Colorado.
October 14, 1988.
*571 Thomas O. Murphy, Longmont, Colo., for debtors.
K. Preston Oade, Golden, Colo., for Alpine Associates, Inc.
Sally Zeman, Denver, Colo., Chapter 13 Trustee's Office.
MEMORANDUM OPINION AND ORDER
SIDNEY B. BROOKS, Bankruptcy Judge.
THIS MATTER comes before the Court on the Debtor's Motion to Confirm their Chapter 13 Plan and Alpine Associates, Inc.'s ("Creditor" or "Alpine") Objection to confirmation. Hearings were held on June 17 and August 17, 1988.
The Court took under advisement the threshold issue raised by the objecting Creditor as to whether or not these Debtors qualify as Chapter 13 Debtors pursuant to 11 U.S.C. § 109(e). The Creditor maintains that the Debtors' noncontingent, liquidated, unsecured debts exceed $100,000.00 and the Debtors thus do not qualify as Chapter 13 debtors pursuant to Section 109(e) of the Bankruptcy Code. This Opinion addresses that issue.[1]
BACKGROUND AND FINDINGS OF FACT RELEVANT TO 11 U.S.C. § 109(e)
1. Debtors filed their Petition for relief pursuant to Chapter 13 on December 3, 1987.
2. Debtors initially scheduled unsecured debt of $83,618.00 at the "Summary of Debts and Property" on their bankruptcy Schedules. Debtors also concurrently scheduled total unsecured debt of $93,618.00 at "Paragraph 12(c) Unsecured Debts," which list of debt included a $10,000.00 entry for a debt owing to the Bank of Boulder ("Bank") with a notation "Mortgage (Return Condo)." Additional amended Schedules and Statements were subsequently filed by the Debtors which included inconsistent and confusing entries for the amount of unsecured debt and the amount of the Bank's claim.[2]
3. Debtors also identified as an asset on the original December 3, 1987 Schedules, a condominium located at 635 Walnut in Boulder, Colorado and a debt owing to the Bank in the amount of $82,784.00 secured by the condominium valued at $82,785.00. A notation appears: "(Condo Return)."
4. On June 9, 1988, Stephen Clark conveyed to the Bank, by Warranty Deed and estoppel agreement, the condominium unit he owned at 635 Walnut, Unit 4, Boulder, *572 Colorado. The transaction was acknowledged to be a Deed in Lieu of Foreclosure and the property was accepted by the Bank in full and final satisfaction of its claim against Stephen Clark.
5. Alpine and the Debtors have engaged in extended, costly, and bitter litigation pursuant to the allegations of Alpine that Stephen Clark, when serving as an employee or independent sales representative for Alpine, deceived and damaged Alpine. Alpine maintains that as a result of Stephen Clark's dishonesty, evidenced by a series of sales effected by Stephen Clark for Alpine's business competitor Royal Supply Company, Inc. while he was still working for Alpine, Alpine lost substantial sales opportunities and profits. Alpine claims lost sales and profits of perhaps $333,831.00 as damages, but the pre-petition state court litigation pertaining to that claim and the amount of the claim has not been resolved or concluded, as of this time.[3] Debtors scheduled Alpine as a creditor with a $1.00 claim, and indicated the consideration or basis of the claim was "lawsuit."
6. Stephen Clark has admitted to "deceiving" Alpine. Stephen Clark has not, however, conceded that Alpine's claim, if any, would not be dischargeable pursuant to 11 U.S.C. § 523 or a bar to discharge pursuant to 11 U.S.C. § 727 if this were a Chapter 7 case. Alpine maintains the claim would be non-dischargeable or a bar to discharge in Chapter 7.
7. Travelers Insurance Company ("Travelers") paid to Alpine, by check dated July 2, 1987, the sum of $22,500.00 "in full settlement [of] Clark Fidelity claim" pursuant to an insurance policy which insures against "fraudulent or dishonest acts of employees. . . ." Travelers also filed a $22,500.00 Proof of Claim in this case on June 2, 1988. Debtors did not originally list, and have not yet listed, Travelers as a creditor.
8. The parties stipulated to the accuracy and the introduction of Alpine's Exhibit 6, which was an itemized list of Debtors' creditors and "actual debt" as of December 3, 1987, except that Debtor disputed certain claims as follows: (a) Bank of Boulder mortgage of $10,291.45, (b) City of Boulder, Treasurer of Real Estate tax on condominium of $688.90), (c) City of Boulder claim of $477.00, and (d) 1984 Honda Accord debt. Exhibit 6 indicates Debtors' total debt at time of filing the Petition was $105,722.43, not including Alpine's or Travelers' claims. After deducting the contested claims, Exhibit 6 reflects "actual debt" admitted by the Debtors of $91,364.08.
OPINION AND DISCUSSION
The issue before the Court is whether or not the Debtors' unsecured debt as of the date of filing the Petition exceeded $100,000.00 in noncontingent, liquidated claims. If the answer is yes, Debtors cannot qualify under the filed Petition for relief pursuant to Chapter 13. If the answer is no, then the Debtors do qualify and they may file an Amended Plan in accordance with this Court's prior Findings of Fact and Conclusions of Law.
The answer to the question will be determined by the nature, amount, and classification of the two principal disputed claims, those of (1) the Bank of Boulder and (2) the Travelers Insurance Company.
1. Bank of Boulder Claim
With regard to the Bank of Boulder claim, Debtors maintain, first, that because the Bank accepted its collateral on June 9, 1988 in full and final satisfaction of its claim, no claim can be counted against the Debtors as of December 3, 1987, the date of filing. Debtors argue, second, that there was no deficiency claim as of December 3, 1988 which is, in part, demonstrated by the Bank's subsequent acceptance of the Deed in Lieu of Foreclosure.
As a matter of law and as a matter of logic and fairness, calculation of bona fide deficiency claims of undersecured creditors *573 is appropriate in determining total unsecured debt of a Chapter 13 debtor.
Pursuant to 11 U.S.C. § 506(a),[4] a creditor with a claim secured by a lien on property has a secured claim only to the extent of the value of the property and an unsecured claim for the balance, or for the amount of the claim which exceeds the value of the property. This Court will follow the majority of courts on this issue and apply Section 506(a) in calculating the amount of secured and unsecured debt held by a Chapter 13 debtor. Matter of Day, 747 F.2d 405, 406 (7th Cir.1984); Matter of Martin, 78 B.R. 928 (Bankr.S.D.Iowa 1987); In re Potenza, 75 B.R. 17, 18 (Bankr.D. Nev.1987).
Courts have consistently examined the true value of collateral securing a debt when evaluating a debtor's eligibility for Chapter 13 relief under 11 U.S.C. section 109(e). In re Day, 747 F.2d 405, 406 (7th Cir.1984). The Day Court affirmed the district court's finding that a section 506(a) valuation is appropriate when determining eligibility under section 109(e). In re Potenza, supra at 18.
I reject the ruling, as well as the logic and consequences, of those courts which hold that the entire debt listed as secured by a debtor shall be considered secured debt irrespective of the amount or value of collateral securing the claim. See, In re Morton, 43 B.R. 215 (Bankr.E.D.N.Y.1984); In re King, 9 B.R. 376 (Bankr.D.Or.1981). To rely exclusively on Debtors' characterization of the debt as secured, only, and ignore the realities of collateral value and undersecured claims is to disregard the Code language and its intent. The potential consequences of treating truly undersecured claims as fully secured claims allows for distortion, misuse, and abuse of Chapter 13. See, Matter of Day, supra at 407.
The application of Section 506(a) and determination of unsecured and secured portions of debt is to be established as of the date of filing the Petition in bankruptcy. In re Potenza, supra at 18; See, Matter of Pearson, 773 F.2d 751, 757 (6th Cir.1985).
Under this holding, the Debtors in this case must recognize the Bank of Boulder claim, as of the time the Debtors filed their Petition, including the Bank's deficiency, if any. Debtors argue there was no deficiency. On the contrary, all evidence produced at trial and the Debtors' initial sworn Schedules reflect a deficiency of approximately $10,000.00. Debtors' original Schedules list a $10,000.00 unsecured Bank claim, which Schedules presumably were accurate and reliable when signed and filed by Debtors, and reflect a recognition of a deficiency claim. Exhibit 6 reflects a $10,291.45 deficiency claim. Two offers to purchase the condominium in the winter of 1987 were evidently made for $75,000.00 (Reynolds) and for $68,000.00 (DeLuca). Appraisals conducted for the Bank valued the property at $75,000.00 and $81,000.00. As testified to by a Bank officer, as of December 3, 1987, the amount of the Bank's claim was $85,291.45 and there existed an expected $10,000.00 deficiency claim of the Bank.
The post-petition transfer of the collateral to the Bank by a Deed in Lieu, which was accepted by the Bank in full and final satisfaction of its claim, does not retroactively extinguish the Bank's deficiency claim as of the date the Petition was filed.
Thus, this Court finds that as of December 3, 1987, there was an unsecured claim of the Bank in the amount of $10,000.00 which amount is to be added to the sum of debt admitted by the Debtors and reflected in Exhibit 6. This results in total unsecured *574 debt of $101,364.08. This amount exceeds the $100,000.00 limit set forth in Section 109(e) and Debtors are thus disqualified as Chapter 13 Debtors by virtue of the Bank's claim.
2. Travelers Insurance Company Claim
With regard to the second disputed claim, that of Travelers for $22,500.00, the Debtors argue that it is not to be included in the Section 109(e) calculation. Debtors rely on an assertion that the Travelers' claim, as subrogee of Alpine under the fidelity policy, is only as good and enforceable, as that of Alpine's claim, and as such, it is contingent and unliquidated. Alpine, however, argues the Travelers' $22,500.00 claim should be included, and relies primarily on the reasoning and decision in In re Furey, 31 B.R. 495 (Bankr.E.D.Pa.1983).
In Furey, the debtor had admitted misappropriating funds of his employer and the employer's insurance company paid $217,073.65 to the employer under a fidelity policy. The insurer filed a proof of claim for $228,178.65 against the debtor. The Court in Furey focused on the question of whether or not the claim was "liquidated" as required in Section 109(e). It found that the debtor had admitted misappropriation of funds, the insurance payment had undisputedly been made, the payment amount was readily ascertainable and, consequently, the debt was "liquidated," thus satisfying the requirement of Section 109(e).
The pivotal question in Furey was whether or not the insurer's claim qualifies as "liquidated" or not. The term "liquidated" is not defined in the Code, but, generally a debt is deemed liquidated if ". . . the amount due is capable of ascertainment by reference to an agreement or by simple computation." In re Potenza, supra at 19; In re Sylvester, 19 B.R. 671, 673 (Bankr. 9th Cir.1982); Matter of Pearson, supra at 754.
Two cases in this District are instructive in deciding the issue of what is a liquidated debt, as well as what is a contingent debt. In re Burgat, 68 B.R. 408 (Bankr.D. Colo.1986). In re Blehm, 33 B.R. 678 (Bankr.D.Colo.1983).
In Blehm and Burgat, each Court rejected the view that a disputed debt is unliquidated and thus must be excluded from Section 109(e) calculations. The Courts, instead, adopted the generally accepted notions that a "debt" is (a) essentially synonymous with a "claim" and (b) a claim qualifies as liquidated, if it is readily calculable or ascertainable as to amount, and (c) a debtor's dispute, defenses or counterclaims, do not affect the character and classification of a claim as being liquidated. Blehm, supra at 679; Burgat, supra at 411; In re Sylvester, supra at 673; See, In re Thomas, 211 F. Supp. 187, 192 (D.Colo.1962), aff'd, 327 F.2d 667 (10th Cir. 1964).
Here, the amount of Travelers' claim, $22,500.00, is clear, precise and not subject to bona fide dispute. It is liquidated.
As to the element of whether or not a debt is contingent, in Blehm, the Court concluded that a claim in the nature of a tort, which was disputed by a debtor and not judicially fixed as to liability or amount, may be properly and fairly classified as a contingent claim. It was held that a claim which arises ". . . only upon the occurrence or happening of an extrinsic event which will trigger the liability of the debtor . . .," as contemplated by the debtor and creditor, may be deemed contingent and thus not included in the $100,000.00 unsecured claim limit (emphasis added). Blehm at 680, citing In re All Media Properties, Inc., 5 B.R. 126 (Bankr.S.D.Tex.1980). Tort claims such as fraud, piercing the corporate veil, or quantum meruit, which were disputed and where proof as to liability and damages is still to be produced, were likened to and deemed contingent in nature.[5]
In Burgat, the Court adhered to the rule that disputed claims are, generally, to be included in Section 109(e) calculations. It indicated, in dicta, however, that a debt will *575 be deemed contingent and not included for Section 109(e) purposes if it is disputed and the creditor cannot demonstrate at least ". . . a threshold `right to payment'" and the debtor's "`liability on the claim.'" Burgat, supra at 410. A claim without a ". . . valid underlying legal basis . . .," as distinguished from one which is merely subject to offset or counterclaim, might well not be included in calculating the $100,000.00 unsecured debt limit.
In the instant case, the record reveals uncontroverted evidence that (a) Stephen Clark admitted to "deceiving" Alpine, (b) Travelers paid $22,500.00 to Alpine under its fidelity policy, and (c) sales by Stephen Clark for Alpine declined significantly during the period of time prior to his resignation from Alpine, the same period of time he is alleged to have been surreptitiously selling for Alpine's competitor, Royal Supply Company. Stephen Clark denies culpable conduct which might except a debt from discharge or bar a discharge under Chapter 7. He also denies liability to Alpine, as well as to Travelers, on their respective claims. Mr. Clark has not, however, filed an objection to Travelers' claim. Moreover, the grounds on which he denies liability on the claims are in the nature of counterclaims, affirmative defenses, setoff, or mitigating circumstances.
Absent a full trial on the merits, which might demonstrate the claim is not allowable, this Court is persuaded the Travelers' claim is supported by not insubstantial evidence.[6] The quantum of evidence thus far produced by Alpine demonstrates that the Travelers claim appears bona fide and that Travelers has, at least, a threshold right to payment. It may indeed be subject to counterclaims, setoff, affirmative defenses, or mitigating circumstances, all of which could perhaps be proved at a trial, but that does not obviate the basic claim or negate the fundamental right to payment on the claim.[7]
This Court finds that as of December 3, 1987, there was an unsecured claim of Travelers in the amount of $22,500.00. When added to the admitted amount of debt reflected on Exhibit 6 and the Bank debt, it results in total unsecured debt of $123,864.08. The Debtors are thus disqualified as Chapter 13 Debtors by virtue of the Travelers' claim.
CONCLUSION
IT IS ORDERED AND ADJUDGED, for the reasons set forth above, that the Debtors do not qualify as Chapter 13 Debtors pursuant to Section 109(e) and consequently their petition pursuant to 11 U.S.C. § 1301 et seq. is hereby DISMISSED.
NOTES
[1] At the termination of the August 17, 1988 hearing the Court made oral findings of fact and rendered conclusions of law on all other issues raised. More specifically, those issues were: (a) whether or not the Debtors' Plan was confirmable pursuant to Section 1325, (b) whether or not the Debtors' Plan was filed in good faith ((a)(3)), (c) whether the Plan was feasible ((a)(6)), and (d) whether or not the Debtors were devoting all their "disposable income" to the Plan (Section 1325(b)). The oral findings and conclusions were reduced to a written memorandum of September 15, 1988.
[2] A "First Amended Summary of Debts" and "Paragraph 12(c)" filed thereafter on March 29, 1988, reported unsecured debt totalling $83,904.00. This amendment included a debt to the Bank of Boulder for $785.00 with the notation "Mortgage (Return Condo)." A "Second Amended Summary of Debts" and "Paragraph 12(c)" was filed July 28, 1988 indicating unsecured debt of $57,341.00 with no debt scheduled as owing to the Bank of Boulder. (The obligation to Bank of Boulder is in addition to a modest signature loan obligation from Debtors to Bank of Boulder over which there is no dispute.)
[3] Jurisdiction, standing, and other preliminary and procedural questions dogged the progress of the state litigation between Alpine, the Debtors, and Royal Supply Company, which litigation was finally stayed by the Debtors' bankruptcy.
[4] "An allowed claim of a creditor secured by a lien on property in which the estate has an interest, or that is subject to setoff under section 553 of this title, is a secured claim to the extent of the value of such creditor's interest in the estate's interest in such property, or to the extent of the amount subject to setoff, as the case may be, and is an unsecured claim to the extent that the value of such creditor's interest or the amount so subject to setoff is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor's interest." 11 U.S.C. § 506(a).
[5] Tort claims as contrasted to contract, promissory note or similar claims. In re Blehm, supra at 680.
[6] It is not intended, nor is it necessary or desirable, that the Court hold full evidentiary hearings on disputed claims at the forefront of a Chapter 13 case and prior to confirmation.
[7] Travelers and Alpine's claims may each also be dischargeable in Chapter 7, but that is a different matter and one to be determined only at the proper time in the proper adversary proceeding. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543390/ | 997 A.2d 791 (2010)
COLLINS
v.
TAKOMA PARK.
Pet. Docket No. 99.
Court of Appeals of Maryland.
Denied June 21, 2010.
Petition for writ of certiorari denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543399/ | 67 B.R. 179 (1986)
In re B & P ENTERPRISES, INC., and William Bruce Prewett and Anita Suzanne Prewett, Debtors.
Bankruptcy Nos. 84-23762-K, 85-20756-K.
United States Bankruptcy Court, W.D. Tennessee, W.D.
August 22, 1986.
*180 Gregory Nelson, Trial Atty., Tax Div., Dept. of Justice, Washington, D.C., Gary Vanasek, Asst. U.S. Atty., Memphis, Tenn., for U.S.
William A. Cohn, Memphis, Tenn., for debtors.
MEMORANDUM AND ORDER
DAVID S. KENNEDY, Bankruptcy Judge.
In these jointly administered Chapter 11 cases the above-named debtors seek, in pertinent part here, to allocate payments under a joint Chapter 11 reorganization plan to the Internal Revenue Service ("I.R.S.") so that the "trust fund" portion of the I.R.S.' claim will be credited first until paid in full. I.R.S. objects to such treatment.
BACKGROUND
Although the record of this proceeding is sparse, the case record as a whole reflects that on October 18, 1984, the debtor, B & P Enterprises, Inc., filed an original, voluntary petition under Chapter 11 of the Bankruptcy Code; and on February 25, 1985, the debtors, William Bruce Prewett and Anita *181 Suzanne Prewett, filed an original, voluntary petition under Chapter 11. On May 3, 1985, an order was entered allowing for a joint administration of the above related estates.
Although a portion of the I.R.S.' claim is disputed, debtors owe the I.R.S. approximately $29,000.00 in pre-Chapter 11 corporate taxes and penalties for the third quarter of 1984 of which $17,024.81 represents "trust taxes".[1] Prior to bankruptcy, the I.R.S. had not instituted collection efforts or otherwise attempted "enforced collection measures" against either the corporate debtor or Mr. and Mrs. Prewett. Of course, the bankruptcy filings triggered the automatic stay provisions of 11 U.S.C. § 362(a) which prevented the I.R.S. from instituting collection efforts outside the bankruptcy court. Debtors' Chapter 11 reorganization plan provides, inter alia, that the I.R.S. shall be paid its allowed claim in full (approximately $29,000.00) in deferred payments with an appropriate rate of interest in accordance with the mandatory provision contained in 11 U.S.C. § 1129(a)(9)(C). Specifically, § 2.2 of the debtors' joint Chapter 11 plan provides, however, that the I.R.S. must first apply all payments under the joint plan to the "trust fund" portion of FICA and withholding taxes of the debtor, B & P Enterprises, Inc., until paid in full. On March 28, 1986, the joint plan was confirmed; however, the instant matter was expressly reserved by consent of the debtors and the I.R.S. and was subsequently argued before this court on August 11, 1986. A disposition of the instant matter was taken under advisement.
QUESTION PRESENTED
The ultimate question for judicial determination is whether the debtors should be allowed to allocate payments under their joint Chapter 11 plan so that the "trust fund" portion of the I.R.S.' allowed claim will be credited first until paid in full.
POSITION OF I.R.S.
I.R.S. essentially asserts, inter alia, that any bankruptcy case under either Chapter 7, 9, 11 or 13 of the Bankruptcy Code is, ipso facto, sufficient "court action" to render the debtor's (or trustee's) payments "involuntary".
POSITION OF DEBTORS
Debtors primarily assert that payments under a Chapter 11 plan are "voluntary".
DISCUSSION
"Trust fund" taxes are those taxes withheld by employers from employees' paychecks that are required to be held in trust pursuant to 26 U.S.C. § 7501. Other corporate tax liabilities, such as corporate income taxes and the employer's share of Social Security taxes, are generally denominated as "non-trust fund" taxes. The following provisions of the Internal Revenue Code of 1954 govern the collection of trust fund taxes: 26 U.S.C. § 3402 requires that employers making payments of wages deduct and withhold income taxes for such wages; 26 U.S.C. § 3402 also establishes that the employer should be held liable for the payment of the tax required to be deducted and withheld; 26 U.S.C. § 3102(a) places the duty of collection upon the employer; 26 U.S.C. § 7501 provides that the withheld or collected taxes must be held in a special trust fund for the United States; and 26 U.S.C. § 6672 imposes personal liability upon those corporate officials in charge of collecting the trust fund taxes who fail to remit these funds to the United States.
It is undisputed and clear that a non-bankruptcy taxpayer who makes a "voluntary" tax payment to the I.R.S. may designate, at the time of payment, the manner of allocation of such payment among tax, interest and penalty. Muntwyler v. United States, infra; O'Dell v. United *182 States, 326 F.2d 451 (10th Cir.1984); and on the other hand, a taxpayer who makes an "involuntary" payment may not designate the manner of its allocation. In the latter event the I.R.S. has full discretion to apply such payment to maximize the amount of assessed tax that may be collected. United States v. DeBeradinis, 395 F. Supp. 944 (D.C.Conn.1975), aff'd 538 F.2d 315 (2nd Cir.1976); United States v. Augspurger, 508 F. Supp. 327 (W.D.N.Y.1981). In the absence of a designation or agreement as to how tax payments are to be applied, the I.R.S. may apply the payment received against any amount owed. In re Tom Le Duc Enterprises, Inc., 47 B.R. 900 (D.Mo. 1984).
Courts which have addressed the allocation question have adopted the United States Tax Court's definition of an "involuntary" payment set forth in Amos v. Commissioner, 47 T.C. 65 (1966). It provides:
"An involuntary payment of federal taxes means any payment received by agents of the United States as a result of a distraint or levy from a legal proceeding in which the Government is seeking to collect its delinquent taxes or file a claim therefor."
Policy Statement P-5-60, reprinted in Internal Revenue Manual (CCH) 1350-15, provides that "the taxpayer, of course, has no right of designation in the case of collections resulting from enforced collection measures".
In Muntwyler v. United States, 703 F.2d 1030, 1033 (7th Cir.1983), the Seventh Circuit Court of Appeals stated:
"The distinction between a voluntary and involuntary payment in Amos and all the other cases is not made on the basis of the presence of administrative action alone, but rather the presence of court action or administrative action resulting in an actual seizure of property or money as in a levy. No authorities support the proposition that a payment is involuntary whenever an agency takes even the slightest action to collect taxes, such as filing a claim or, as appears to be a logical extension of the Government's position, telephoning or writing the taxpayer to inform him of taxes due."
The following cases support the debtors' position: In re A & B Heating & Air Conditioning, Inc., 53 B.R. 54 (Bankr.Ct. M.D.Fla.1985), aff'd CCH Bankr.Law Rep. ¶ 71,220 (D.C.M.D.Fla.1986); In re Energy Resources Co., Inc., 59 B.R. 702, 705-6 (Bankr.Ct.Mass.1986); In re Lifescape, Inc., 54 B.R. 526 (Bankr.Ct.Colo.1985); In re Franklin Press, Inc., 52 B.R. 151 (Bankr. Ct.Fla.1985); accord In re Hartley Plumbing Company, Inc., 32 B.R. 8 (Bankr.Ct.M. D.Ala.1983).
I.R.S. relies upon the following cases: In re Frost, 47 B.R. 961 (D.C.Kan.1985); In re Avildsen Tools and Machines, Inc., 40 B.R. 253 (D.C.N.D.Ill.1984); In re Mister Marvins, Inc., 48 B.R. 279 (E.D.Mich.1984); In re Bulk Sale of Inventory, etc., 6 Kan. App. 2d 579, 631 P.2d 258 (1981); Muntwyler v. United States, 703 F.2d at 1034 n. 2.
The bankruptcy court case of In re A & B Heating & Air Conditioning Co., Inc., supra, at p. 57 should be specifically observed:
"Court involvement in the context of a Chapter 11 reorganization case is not the type which results in seizure of property or money as in a levy. Unlike a taxpayer faced with a government instituted collection proceeding which may lead ultimately to levy upon the taxpayer's assets, a Chapter 11 debtor enjoys great latitude in how and if a plan is proposed and thus how and when the I.R.S. will be paid. § 1129 requires only that a plan provide for payment of pre-petition taxes over a period not to exceed 6 years from the date of assessment in order that it may be confirmed. The debtor propounding a plan has a number of options with respect to treatment of a claim by the I.R.S. and it is the freedom afforded by these options which dictates the conclusion that payments to the I.R.S. pursuant to a confirmed Chapter 11 plan of reorganization are voluntary."
In re Avildsen Tools & Machine, Inc., 794 F.2d 1248, CCH Bankr.Law Rep. ¶ 71,245 *183 (7th Cir.1986), should also be observed. Although the Seventh Circuit expressly stated 794 F.2d at 1252, CCH Bankr.Law Rep. at p. 89,407 that "[W]e do not have to decide whether a payment for delinquent pre-bankruptcy petition taxes made to the government while the corporation is in bankruptcy is voluntary or involuntary . . .," this case contains a good discussion of the policies behind our tax laws as they relate to the instant proceeding.[2]
POLICY CONSIDERATIONS
Tension perhaps exists here between the general policies of the bankruptcy and internal revenue laws. Congress has encouraged financially distressed debtors to pay their debts under Chapter 11 (or 13) of the Bankruptcy Code rather than opting for liquidation. See H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 220 (1977), U.S.Code Cong. & Admin.News 1978, p. 5787. It is the statutory duty of the I.R.S. to collect and maximize taxes owed to the government. The I.R.S.' policy in applying involuntary payments initially against non-trust fund taxes is consistent with the purposes of 26 U.S.C. § 6672 to encourage those persons charged with the collection of withholding taxes from employee wages to pay these sums to the government.
CONCLUSIONS
Although this court is not overly sympathetic with debtors who fail to pay their trust fund taxes, it is not prepared to adopt a per se or inflexible rule that that the mere filing of a Chapter 11 case and the ensuing confirmation process, standing alone, should automatically disallow (or allow) a trustee or debtor-taxpayer to allocate payments under a plan to the I.R.S. so that the "trust fund" portion of the I.R.S.' claim always will be credited last (or first until paid in full).[3] Thusly, a Chapter 11 case, in and of itself, should not, ipso facto, result in "enforced collection measures" as contemplated in Policy Statement P-5-60, supra. Notwithstanding the "voluntary-involuntary" or "court action-non-court action" dichotomy, the allocation question in a Chapter 11 case under the Bankruptcy Code should be left to judicial discretion to be decided on a case-by-case basis and analysis with the burden of proof being on the trustee or Chapter 11 debtor-taxpayer to demonstrate exceptional or special circumstances or equitable reasons warranting such allocation.[4] The question should *184 be considered in light of, inter alia, the structure and general purposes of both the internal revenue and bankruptcy laws. Bankruptcy Courts should look closely at the totality of the pre and post-bankruptcy facts and circumstances before allowing (or disallowing) such allocation. Among other facts a bankruptcy court should consider to determine whether a Chapter 11 debtor (or trustee) should be allowed to allocate payments are as follows: the history of the debtor; the absence or existence of pre-bankruptcy collection or "enforced collection measures" of the I.R.S. against the corporation and responsible corporate officers; the nature and contents of a Chapter 11 plan (e.g., last resort liquidation or reorganization); the presence, extent and nature of administrative and/or court action; the presence of pre- or post-bankruptcy agreements between the debtor (or trustee) and the I.R.S.; and the existence of exceptional or special circumstances or equitable reasons warranting such allocation.
Here, the debtors have simply failed to demonstrate any exceptional or special circumstances or equitable reasons warranting such allocation.[5] Considering the allocation question in light of the structure and general purposes of both the internal revenue and bankruptcy laws, the court hereby denies under a totality of the particular facts and circumstances the debtors' request seeking to allocate payments under their joint Chapter 11 plan to the I.R.S. Thusly, in the instant Chapter 11 cases the I.R.S. may designate the manner of the allocation of payments in accordance with applicable non-bankruptcy law and policy i.e. the I.R.S. may apply the first payments under the joint Chapter 11 plan to the non-trust fund taxes until paid in full.
The foregoing shall constitute findings of fact and conclusions of law in accordance with Bankruptcy Rule 7052. Accordingly,
IT IS SO ORDERED.
NOTES
[1] Debtors, Mr. and Mrs. Prewett, are apparently "responsible persons" as contemplated in 26 U.S.C. § 6672.
[2] It is interesting to note that the Seventh Circuit in Muntwyler v. United States, 703 F.2d at 1034 n. 2, stated in dicta in footnote two that "[t]he government might have been correct in its claim if the corporation had been in bankruptcy, which it was not". (It is remembered that Muntwyler involved a common law, non-judicial assignment for the benefit of creditors.)
[3] Although Muntwyler v. United States, supra, involved a non-judicial assignment for the benefit of creditors, the Seventh Circuit held that the mere filing of a claim was not sufficient to render payments made by the taxpayer involuntary and, therefore, the taxpayer could direct the allocation of funds paid to the I.R.S. Query, why should a Chapter 11 debtor-taxpayer be automatically penalized merely for filing a Chapter 11 reorganization case rather than opting for, e.g., a non-judicial assignment for benefit of creditors? Congress has encouraged rehabilitation over liquidation. Compare 11 U.S.C. § 525(a) (and the underlying legislative history) which prohibits certain discriminatory treatment by a governmental unit. H.R.Rep. No. 595, 95th Cong., 1st Sess. 366-67 (1977); S.Rep. No. 989 95th Cong. 2nd Sess. 81 (1978). Although the instant matter is not specifically enumerated in § 525(a), this Section of the Code also prohibits a governmental unit from discriminating against a person solely because of the person's insolvency before the bankruptcy petition was filed or during the case. The cited legislative history of the Code indicates that the enumerated list of discriminatory practices contained in § 525(a) is not exhaustive. "The enumeration of various forms of discrimination against former bankrupts is not intended to permit other forms of discrimination." H.R. Rep. No. 95-595, supra, at 367, U.S.Code Cong. & Admin.News 1978 p. 6323.
[4] It has been said that a bankruptcy case is a unique kind of legal matter. The voluntary case is not, in and of itself, a contested proceeding. The typical bankruptcy case, although itself an uncontested matter, may be characterized as an umbrella under which numerous related lawsuits may be litigated. B. WEINTRAUB & A. RESNICK, Bankruptcy Law Manual, ¶ 6.04, p. 6-7. E.g., the mere filing of a proof of claim form in a bankruptcy case does not involve "judicial action". In re Cruz, 357 F. Supp. 1118 (D.C.Puerto Rico 1973). Moreover, a proof of claim executed and filed in accordance with the bankruptcy rules shall constitute prima facie evidence of the validity and amount of the claim. Bankr.Rule 3001(f); 11 U.S.C. § 502(a). Cf. Bankr.Rules 3007 and 9014.
[5] A separate order is being entered contemporaneously herein allowing the I.R.S. to setoff a certain tax refund check arising out of related litigation commenced by the debtors against the I.R.S. The question of contempt and the pending adversary proceeding commenced by the debtors against the I.R.S. will also be dealt with in separate orders. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543704/ | 11 F.2d 520 (1926)
McCAUGHN, Collector of Internal Revenue,
v.
GIRARD TRUST CO.
No. 3362.
Circuit Court of Appeals, Third Circuit.
February 23, 1926.
George W. Coles, U. S. Atty., of Philadelphia, Pa., and A. W. Gregg, Solicitor of Internal Revenue, of Washington, D. C. (T. H. Lewis, Jr., Sp. Atty., Internal Revenue, of Washington, D. C., of counsel), for plaintiff in error.
Joseph Carson and Hampton L. Carson, both of Philadelphia, Pa., for defendant in error.
Before BUFFINGTON, WOOLLEY, and DAVIS, Circuit Judges.
BUFFINGTON, Circuit Judge.
In the court below the Girard Trust Company, executor of Annie Bradford, brought suit and recovered judgment against McCaughn, collector of internal revenue, for taxes alleged to have been erroneously assessed and wrongfully collected from her estate under the provisions of the Revenue Act of 1918 (40 Stat. 1057). Thereupon the collector sued out this writ of error, and the case turns on the meaning and effect to be given, as applied to the real estate here involved, of these words of the act: "Any interest therein * * * with respect to which he has at any time created a trust * * * intended to take effect in possession or enjoyment at or after his death."
Turning to the facts involved, we note that on April 17, 1916, Annie Bradford executed and delivered to the Girard Trust *521 Company and another named trustee the instrument in question, whereby "for the purpose of reserving the properties and estates hereinafter designated for the benefit of the parties hereinafter mentioned and for the accomplishment of the other purposes hereinafter set forth" she did "grant, bargain, sell, assign, transfer and set over unto trustees, their heirs, successors and assigns," inter alia, the premises here involved, "in trust * * * to collect the rents, issues and profits thereof, and, after the payment of all necessary expenses and commissions, to pay over the real income therefrom * * * unto grantor for and during the term of her natural life: Provided, however, that during the term that grantor is entitled to the income from said properties she shall have the right to occupy or use either or both of said properties for her own personal use or for such other use as she may elect," and, "In further trust upon the death of said grantor to assign, transfer and convey unto Emma Wood Hays, wife of I. Minis Hays, her heirs and assigns, absolutely and in fee, the corpus or principal held hereunder." The instrument further provided: "All the trusts herein named and established are declared by the grantor hereof to be irrevocable by her, the matter of the revocability or irrevocability of these trusts having been carefully considered by her and she having definitely determined that they shall be irrevocable."
In pursuance of the provisions thereof Miss Bradford occupied the premises in question during her life and since then the title thereof has been conveyed by the trustees, pursuant to the terms of the instrument, to those in interest under Mrs. Emma Wood Hays, who died during the life of Miss Bradford. Without citing the authorities set forth so fully and convincingly in the brief of counsel for the trust company, we restrict ourselves to saying they satisfy us that this instrument took effect on delivery and conveyed the fee of the realty here involved to the trustees, that it was irrevocable, and that thereunder a vested interest then inured to Mrs. Hays. But these matters of title do not solve the taxation question before us, for that statute concerns not alone the effect of the instrument in vesting of interests by title, but whether the interest involved thereunder was "intended to take effect in possession at or after his (the grantor's) death."
To determine that question, three questions arise which, as we see it, are questions of fact, namely:
First. Miss Bradford was, when she executed the agreement, the owner in fee of the premises and such realty was property and ownership to which in the statutory words "any interest therein" applied.
Second. Was her interest therein, namely her ownership in fee, an interest, to again use the words of the statute, "with respect to which he (she) has at any time created a trust"? If so, the agreement therefore created a trust, the subject of which, inter alia, was the realty she owned in fee.
Third. Was this trust, to again use the words of the statute, "intended to take effect in possession or enjoyment at or after her death"?
The agreement answers that question: "In further trust upon the death of said grantor to assign, transfer and convey unto Emma Wood Hays, wife of I. Minis Hays, her heirs, and assigns, absolutely and in fee, the corpus or principal held hereunder."
We are here dealing with the words "intended to take effect in possession or enjoyment," and this with reference to Miss Bradford's death. By the terms of the instrument Miss Bradford had the right "to occupy or use either or both of said properties for her own personal use" during her life, and in point of fact actually was herself, in the words of the statute, "in possession or enjoyment" thereof, and Mrs. Hays was during Miss Bradford's life never in possession or enjoyment of them, first, because the exclusive possession and enjoyment of them was in Miss Bradford during her life; and, secondly, because the deed intended and provided that, so far as Mrs. Hays' possession and enjoyment was concerned, it should not take effect until after the death of Miss Bradford. Taking into consideration the taxation statute and the agreement in reference to this realty, Miss Bradford irrevocably by a then delivered instrument divested her title and vested it in the trustees. She thereby vested an estate in remainder to Mrs. Hays, but postponed such estate in possession and enjoyment until after Miss Bradford's death. In other words, she was reserving to herself, or creating by the deed, the ordinary incidents of continued ownership, viz. exclusive possession and enjoyment of her real estate for herself and postponing the ordinary incidents of ownership, viz. possession and enjoyment, on the part of Mrs. Hays until after her own death. It was such a post mortem disposition of property "to take effect in possession and enjoyment at or after his death" the statute subjected to taxation.
It follows, therefore, the judgment below must be reversed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543427/ | 997 A.2d 447 (2010)
VEVERKA
v.
DOL.
No. 09-335.
Supreme Court of Vermont.
April 1, 2010.
Appeal Disposed of Without Published Opinion or Memorandum Decision Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543935/ | 130 Pa. Commw. 124 (1989)
567 A.2d 741
COMMONWEALTH of Pennsylvania, DEPARTMENT OF ENVIRONMENTAL RESOURCES, Petitioner,
v.
The Honorable Robert JUBELIRER, President Pro Tempore of the Senate, the Honorable D. Michael Fisher, Chairman of the Senate Environmental Resources and Energy Committee, the Senate of the Commonwealth of Pennsylvania et al., Respondents.
Commonwealth Court of Pennsylvania.
Argued October 4, 1989.
Decided December 7, 1989.
*126 Keith E. Welks, Chief Counsel, with him, Richard P. Mather, Asst. Counsel, Dept. of Environmental Resources, Richard D. Spiegelman, Executive Deputy Gen. Counsel, Harrisburg, and Carl H. Shuman, Deputy Gen. Counsel, Office of General Counsel, Office of the Governor, for petitioner.
John P. Krill, Jr., with him, Linda J. Shorey, Ronald W. Chadwell, and R. Timothy Weston, Kirkpatrick & Lockhart, Harrisburg, for respondents, Robert Jubelirer, President Pro Tem. of The Senate, D. Michael Fisher, Chairman of the Senate Environmental Resources and Energy Committee, and The Senate of the Com. of Pa.
*127 James L. Walsh, with him, Vincent C. DeLiberato, Harrisburg, for respondents, Gary D. Hoffman, Director of the Pennsylvania Code and Pennsylvania Bulletin, John Hartman, Director of the Legislative Reference Bureau, and The Legislative Reference Bureau.
S. David Fineman, Fineman & Bach, P.C., Philadelphia, with him, W.C. Matthews, III, Chief Counsel, Coatesville, Independent Regulatory Review Commission, for respondents, John R. McGinley, Jr., Chairman of the Independent Regulatory Review Commission, Commissioner Irvin G. Zimmerman, Commissioner Robert J. Harbison, III, Commissioner Mark Schwartz, Frank J. Ertz, Executive Director of the Independent Regulatory Review Commission, and the Independent Regulatory Review Commission.
Edwin L. Klett, with him, William A.K. Titelman, Christine L. Donohue and William H. Clark, Jr., Pittsburgh, Klett, Lieber, Rooney & Schorling, for amicus curiae, The House of Representatives of the Com. of Pa.
Henry G. Barr, Rhoads & Sinon, Harrisburg, for amicus curiae, Pennsylvania Chamber of Business and Industry.
Douglas Y. Christian, with him, Judith L. Rosenthal, Reed, Smith, Shaw & McClay, Philadelphia, and Stanley L. Arabis, Randor, for amicus curiae, Sun Company, Inc.
Before CRUMLISH, Jr., President Judge, and BARRY, COLINS, PALLADINO and SMITH, JJ.
OPINION
CRUMLISH, Jr., President Judge.
The Pennsylvania Department of Environmental Resources (DER) has filed a petition for review, an application for special relief, and a motion for expedited consideration of the application for special relief addressed to this Court's original jurisdiction. DER asks this Court (1) to declare the Regulatory Review Act (Act), Act of June 25, 1982, P.L. *128 633, as amended, 71 P.S. §§ 745.1 745.15,[1] unconstitutional and (2) to direct the Legislative Reference Bureau to publish regulations adopted by the Environmental Quality Board (EQB), but disapproved by the Independent Regulatory Review Commission (IRRC) and by the Pennsylvania Senate when proposed for approval by the Governor.
This Court scheduled a hearing for September 7, 1989, on DER's application for special relief. On September 7, 1989, the parties entered into and presented to this Court a stipulation of counsel with a statement of stipulated facts (Stipulation) and a joint application for advancement of argument and argument en banc. We granted the joint application by Order of September 7, 1989, and scheduled en banc argument for October 4, 1989. We also denied DER's application for special relief on the basis that expedited disposition of the petition for review seeking declaratory relief would obviate the need for special relief.
On September 1, 1989, respondents Gary R. Hoffman, Director of the Pennsylvania Code and Pennsylvania Bulletin, John Hartman, Director of the Legislative Reference Bureau, and the Legislative Reference Bureau filed an answer to the petition for review and application for special relief. On September 8, 1989, respondents The Honorable Robert Jubelirer, President pro tempore of the Senate, The Honorable D. Michael Fisher, Chairman of the Senate Environmental Resources and Energy Committee, and the Senate of Pennsylvania filed answers with new matter. Respondents John R. McGinley, Jr., Chairman of the IRRC, Commissioner Irwin G. Zimmerman, Commissioner Robert J. Harbison, III, Commissioner Mark Schwartz, Frank J. Ertz, Executive Director of the IRRC, and the IRRC filed answers with new matter on September 11, 1989.
On October 4, 1989, this Court, sitting en banc, heard argument. Briefs and cross-motions for summary judgment *129 have been filed by the parties. The Pennsylvania Chamber of Business and Industry, the Pennsylvania House of Representatives and Sun Company, Inc., have filed amicus curiae briefs opposing the relief sought by DER. DER has filed reply briefs.
STATEMENT OF FACTS
According to the statement of stipulated facts filed by the parties, the EQB voted on July 9, 1988, to propose amendments to regulations codified at 25 Pa.Code Ch. 129 (relating to standards for sources of volatile organic compounds).[2] The EQB proposed the addition of volatility limitations as measured by Reid Vapor Pressure (RVP) applicable to all gasoline sold or exchanged in the Commonwealth beginning in the summer of 1990. The institution of these limitations is a part of the Commonwealth's continuing effort to reduce ozone levels in our environment and thereby promote the public health.
On October 5, 1988, the EQB submitted a copy of the proposed amendments to the IRRC, the Chairpersons of the Senate Environmental Resources and Energy Committee, the House Conservation Commission and the Legislative Reference Bureau. The proposed regulations were published at 18 Pa.B. 4666 on October 15, 1988. Neither the House nor the Senate took action on the proposed regulations by November 4, 1988, the deadline under the Act, because neither was in active session during the statutorily defined review period.
*130 The IRRC disapproved the proposed regulations by its order of November 2, 1988. That order stated in part "[t]his order constitutes a bar to final publication of IRRC Regulation No. 7-172." (Stipulation, para. 20.) On December 1, 1988, DER returned the proposed regulations to the IRRC pursuant to Section 6(a) of the Act, 71 P.S. § 745.6(a), in original form with a letter submitted for the purpose of added justification. The IRRC once again disapproved the proposed regulations on December 7, 1988, and indicated that its order constituted a bar to final publication. On January 23, 1989, the Governor sent a report in support of the proposed regulations to the General Assembly pursuant to Section 7(b) of the Act, 71 P.S. § 745.7(b).
On February 1, 1989, the IRRC voted to continue its order of December 7, 1988, disapproving of the proposed regulations as resubmitted by DER on December 1, 1988, and as submitted for approval by the Governor to the General Assembly. In addition, pursuant to Section 7 of the Act, 71 P.S. § 745.7, the IRRC voted to transmit the proposed regulations to the General Assembly for consideration in accordance with the procedure set forth in the Reorganization Act of 1955.[3] The IRRC's order also stated that it constituted a bar to final publication.
On February 3, 1989, the IRRC transmitted the proposed regulations and its order of February 1, 1989, to the General Assembly. On March 15, 1989, the Senate Environmental Resources and Energy Committee held a public hearing on the proposed regulations in Harrisburg. On April 6, 1989, the House Conservation Committee held a public hearing on the proposed regulations in State College. After the Committee hearings, the Chairman of the Senate Environmental Resources and Energy Committee distributed to the full Senate a "Report and Recommendations on Regulatory Review Report No. 1-Proposed Gasoline Volatility Regulation." (Stipulation, para. 29.)
On April 12, 1989, the Senate voted to adopt Resolution B to Regulatory Review Report No. 1, disapproving the proposed *131 regulations. Mark R. Corrigan, Secretary of the Senate, by letter dated April 12, 1989, notified Arthur A. Davis, Secretary of DER, that the Senate had rejected the regulations. No action was taken on the proposed regulation by the House during the time period authorized under the Reorganization Act of 1955, as referenced in the Act.
On April 18, 1989, the EQB voted to adopt the final RVP regulations. The final regulations were transmitted to the Office of General Counsel for review pursuant to Section 301(10) of the Commonwealth Attorneys Act.[4] On April 28, 1989, the Office of General Counsel approved the final regulations for form and legality and then transmitted them to the Office of Attorney General. By letter dated May 3, 1989, the Attorney General advised the Office of General Counsel that pursuant to Section 204(b) of the Commonwealth Attorneys Act, 71 P.S. § 732-204(b), the Attorney General was disapproving the final regulations. (Stipulation, para. 34.)
On May 5 and May 11, 1989, DER advised EQB that it disagreed with the Attorney General's objections. However, DER recommended that EQB delete Section 129.73 of the regulations in order to respond to those objections. On May 16, 1989, EQB voted to rescind its order of April 18, 1989, adopting the final regulations, and EQB voted to adopt a new order approving a revised version of the final regulations, deleting Section 129.73. The Office of General Counsel resubmitted the revised final regulations to the Office of Attorney General by letter dated May 24, 1989.
By memorandum dated June 14, 1989, the Office of Attorney General advised the Office of General Counsel that the revised final regulations had been approved for form and legality. By separate letter dated June 14, 1989, the Attorney General advised Gary R. Hoffman that the Attorney General's approval of the regulations "should not be taken to mean that this office is approving publication of the regulations", and that the Attorney General reserved "judgment on whether the legislative action regarding this *132 regulation under the Regulatory Review Act precludes publication." (Stipulation, para. 38.)
The Office of General Counsel deposited the final regulations for filing and publication with Gary R. Hoffman and the Legislative Reference Bureau on August 22, 1989. On August 24, 1989, Hoffman informed DER that the Senate's disapproval of the regulations constituted a permanent bar to publication.
ISSUE
This matter comes before us on cross-motions for summary judgment. There is no genuine issue of material fact, and the question before us is purely one of law. We must determine whether the Act violates the constitutional doctrine of separation of powers between and among the branches of this Commonwealth's government and whether the respondents' actions pursuant to that Act were lawful and constitutional.
DISCUSSION
The General Assembly, in passing this Act, recognized an excessive promulgation of regulations without effective review of their cost benefits, duplication, inflationary impact and conformity to legislative intent. The Act's express language indicates that the General Assembly's purpose in creating the IRRC was to eliminate this excess:
The General Assembly finds that it must provide a procedure for oversight and review of regulations adopted pursuant to this delegation of legislative power to curtail excessive regulation and to establish a system of accountability.. . . It is the intent of this act to establish a method for continuing and effective review, accountability and oversight. It is the further intent of this act to provide for primary review by a commission with sufficient authority, expertise, independence and time to perform that responsibility. It is the further intent of this act to provide ultimate review by the General Assembly *133 of those regulations which may be contrary to the public interest. This act is intended to provide a method of oversight and review of regulations issued by executive agencies to assist the Governor and the General Assembly in their supervisory and oversight functions. . . .
Section 2 of the Act, 71 P.S. § 745.2.
The IRRC consists of five commissioners. One is appointed by the Governor, one by the President pro tempore of the Senate, one by the Speaker of the House of Representatives, one by the Minority Leader of the Senate and one by the Minority Leader of the House of Representatives. "No member of the General Assembly or any other officer or employee of State Government shall serve as a member of the [IRRC]." Section 4(a) of the Act, 71 P.S. § 745.4(a). The non-gubernatorial appointees serve overlapping terms of three years and the Governor's appointee serves at his pleasure. Section 4(b) of the Act, 71 P.S. § 745.4(b). The nongubernatorial candidates may not be removed from office during their term unless the Governor, with the approval of two-thirds of the Senate, finds clear and convincing evidence of misfeasance, malfeasance or neglect of duty. Section 4(e) of the Act, 71 P.S. § 745.4(e).
Under Sections 5(d) and (e) of the Act, 71 P.S. §§ 745.5(d) and (e), the IRRC is charged with determining whether a proposed regulation is in the public interest. In doing so, the IRRC must "make a determination that the proposed regulation is not contrary to the statutory authority of the agency and intention of the General Assembly in the enactment of the statute upon which the proposed regulation is based." 71 P.S. § 745.5(d). The IRRC must then consider eleven factors in ascertaining whether the proposed regulation is in the public interest. 71 P.S. § 745.5(e). If the IRRC determines that the proposed regulation may be contrary to the public interest, it must notify the agency promulgating that regulation of its finding and therein set forth its objections in reasonable detail.
The agency shall review the [IRRC's] finding and not later than two weeks following the notification . . . shall *134 respond to the [IRRC] as to whether or not the proposed regulation will be withdrawn, revised or returned in its original form with added justification or documentation by the agency. If the [IRRC] does not notify the agency of any objection within 30 days of publication, in the case of proposed rulemaking, . . . the agency may proceed to promulgate the regulation. . . .
Section 6(a) of the Act, 71 P.S. § 745.6(a). If the IRRC disapproves the proposed regulation, it may issue an order barring publication. Sections 6(b) and 7(b) of the Act, 71 P.S. §§ 745.6(b) and 745.7(b).
Under Section 7(a), if the IRRC determines after reviewing an agency's response that the proposed regulation would be contrary to the public interest, it shall notify the Governor, who shall review the proposed regulation and the IRRC's findings within forty-five days. 71 P.S. § 745.7(a). Should the Governor and the agency determine that it is desirable to go forward with the proposed regulation absent revisions, the Governor submits a report to the General Assembly containing the findings of the IRRC, the response of the initiating agency and his own recommendation regarding the proposed regulation. Section 7(b) of the Act, 71 P.S. § 745.7(b). Once the Governor submits his report, the IRRC must, within fourteen days of that submission, either approve the regulation or transmit the proposed regulation to the General Assembly for consideration under the procedures set forth in the Reorganization Act of 1955. If the IRRC fails to transmit the proposed regulation to the General Assembly within fourteen days, the proposed regulation will be considered approved.
STANDING
Several of the respondents submit that DER has no standing to bring suit against the Senate to challenge the constitutionality of statutes adopted by the General Assembly. We disagree.
*135 The petition for review in this case was filed through the Office of General Counsel. Although the Governor has not filed a direct action in which he is named, the interest of the executive branch is adequately represented by DER, as an executive agency. Kennedy v. Sampson, 511 F.2d 430 (D.C.Cir.1974).
In Kennedy, United States Senator Edward Kennedy asserted standing to bring an action seeking a declaration that the President's veto of a statute under Article I, Section 7 of the United States Constitution violated the separation of powers doctrine. The Court upheld Kennedy's standing and rejected the executive branch's contention that only the United States Senate itself could bring suit challenging the President's veto. In doing so, the Court plainly stated that Kennedy's interest in the matter was derivative but was nonetheless substantial.
DER asserts that it, like Kennedy, has a derivative interest in this controversy sufficient to confer standing. We agree and hold that DER has standing to maintain this suit as the representative of the executive branch. Leonard v. Thornburgh, 78 Pa.Commonwealth Ct. 216, 467 A.2d 104 (1983) (Governor not a necessary party in lawsuit where executive interest is adequately represented by duly-appointed agency head).[5]
MOOTNESS
The IRRC and the Senate submit that this action is moot due to the availability of alternative statutory remedies. It is argued that the alleged defects in the Act were cured by Act 1989-19, which now provides for bicameral review of regulations disapproved by the IRRC or the designated standing committees of the General Assembly and thereafter, presentment to the Governor. The IRRC and the Senate conclude that because the Act is no longer in effect *136 and DER is free to submit the proposed regulations to the IRRC under Act 1989-19, DER's claim that the Act is unconstitutional is moot.
Section 6(b) of Act 1989-19 is cited to this Court. A close reading of that section indicates that the IRRC may not issue an order against a proposed regulation transmitted to it with a certificate of the Governor when that proposed regulation is necessary to meet an emergency which includes but is not limited to conditions which may threaten the public health, safety or welfare. Under such circumstances "the regulation can take effect immediately and remain in effect for up to 120 days but after that time may be suspended by the [IRRC] with a statement of disapproval unless it has been approved by the General Assembly under the procedures contained in Section 7(d)." If the IRRC disapproves the regulation after 120 days, the procedures for subsequent review set forth in Section 7 of Act 1989-19 must be followed.
DER submits that in order for this regulation to accomplish its purpose it must become effective immediately and remain effective throughout the summer of 1990. Section 6(b) of Act 1989-19 providing for temporary effectiveness of regulations for a period of 120 days pending ultimate review by the IRRC and the General Assembly would not provide the relief sought.
DER points out that the ultimate review procedure which must be undertaken to achieve promulgation of the regulations and the attendant time periods associated therewith are not eliminated by Section 6(b) of Act 1989-19. Review is simply postponed due to the need for emergency measures. In the face of the time constraints presented in resubmission of the proposed regulations under Act 1989-19, DER submits that the alternative statutory remedy is neither prudent nor viable.
We agree with DER's assertion and conclude that at most the alternative avenue of relief is speculative. When faced with a similar argument as to alternative remedies, *137 the United States Supreme Court in Immigration and Naturalization Service v. Chadha, 462 U.S. 919, 103 S. Ct. 2764, 77 L. Ed. 2d 317 (1983), reached the same conclusion. The words of the Chadha Court are instructive:
It is urged that [intervening and newly enacted statutory remedies] constitute a prudential bar to our consideration of the constitutional question presented in this case. If we could perceive merit in this contention we might well seek to avoid deciding the constitutional claim advanced. But at most these other avenues of relief are speculative. . . . A person threatened with deportation cannot be denied the right to challenge the constitutional validity of the process which led to his status merely on the basis of speculation over the availability of other forms of relief.
Id. 462 U.S. at 936-37, 103 S.Ct. at 2776-77 (citations and footnotes omitted).
We here embrace the logic of the United States Supreme Court in Chadha as to the speculative nature of alternative statutory relief. Even assuming that emergency regulations were instituted under Act 1989-19, the temporary effectiveness of those regulations may not reach through the summer of 1990. A vital element of the RVP regulations is that they should become effective during the summer months when the ozone levels are higher. There is no assurance under the provisions of Act 1989-19 that these regulations, if resubmitted, would be effective throughout the summer of 1990. Accordingly, we shall proceed to address the constitutional issues presented.
CONSTITUTIONALITY
It is axiomatic that legislative enactments enjoy a strong presumption of constitutionality. Commonwealth v. Sutley, 474 Pa. 256, 378 A.2d 780 (1977). "If the legislation has been duly enacted by the General Assembly and is within the scope of legislative power, the challengers bear the heavy burden of proving beyond a reasonable doubt that it *138 `clearly, palpably and plainly' violates the constitution." Shapp v. Sloan, 480 Pa. 449, 464, 391 A.2d 595, 602 (1978).
Where, as here, there is no allegation of irregularity in the enactment of the legislation, the challenger must prove that the legislation was clearly and palpably outside the scope of the General Assembly's legislative powers or in violation of some Constitutional prohibition. For the reasons which follow, we hold that DER has met its burden of proving that the Act violates the separation of powers doctrine.
SEPARATION OF POWERS
DER argues that the Act is unconstitutional because it enables the legislature to usurp the executive branch's function of administering laws. Commonwealth v. Sessoms, 516 Pa. 365, 532 A.2d 775 (1987). Although it is no simple task to determine the nature of "hybrid" governmental bodies such as the IRRC, see, e.g., Mistretta v. United States, 488 U.S. 361, 109 S. Ct. 647, 102 L. Ed. 2d 714 (1989); Morrison v. Olson, 487 U.S. 654, 108 S. Ct. 2597, 101 L. Ed. 2d 569 (1988), and Sessoms, an examination of the IRRC's enabling statute, its functions and composition leads to the conclusion that it is a legislative agency.
In Sessoms, our Supreme Court considered the composition of the Pennsylvania Commission on Sentencing to be the most significant factor in determining its status. Id. 516 Pa. at 375, 532 A.2d at 780. In the case of the IRRC, although no member or employee of the General Assembly may serve on it, four of its five commissioners are appointed by the General Assembly. That the Governor has power to initiate removal of the non-gubernatorial members, which power is extraordinary and limited to circumstances of malfeasance and misfeasance, does not transform the IRRC into an executive agency since the Governor may not remove those four commissioners without the consent of the Senate by two-thirds vote of its members. Thus, what *139 limited removal power exists ultimately rests with the Senate.
In describing the authority of the Pennsylvania Commission on Sentencing, the Sessoms Court found that
the legislative powers that the Commission shares are essentially those of investigation, classification and evaluation. Such tasks are commonly undertaken by special or standing committees and subcommittees composed entirely of members of the respective Houses of the General Assembly. We find no impediment, however, to the creation of a comparable `legislative agency' that includes others as well, so long as the agency's powers do not exceed constitutional limitations.
516 Pa. at 376, 532 A.2d at 780.
Section 2 of the Act illustrates the legislative nature of the IRRC. The General Assembly, in this section declaring legislative intent, has found it must provide an oversight and review procedure. To that end, it has established the IRRC, committing to that body "primary review," while retaining its own power of "ultimate review." Oversight and review much like the investigatory and evaluation functions of the sentencing commission in Sessoms are legislative functions. Indeed, the General Assembly created the IRRC "to assist the Governor and the General Assembly in their oversight functions. . . ." 71 P.S. § 745.2. The IRRC, a body created to assist the General Assembly and empowered to perform preliminary oversight functions, is an agent of the legislature.
It is beyond question in our modern system of government that overlapping responsibility and a degree of interdependence will occur among its three branches. Despite this necessary and salutary coordination among the three branches, we must be rigorous in guarding against the impermissible encroachment of one branch on the prerogatives and duties of another. Our inquiry, then, is to examine the IRRC's functions to determine if, as the petitioner contends, those functions interfere to such a degree as to *140 encroach on the executive's powers. Again, Sessoms provides guidance.
In upholding its constitutionality, the Sessoms Court construed the statute providing for sentencing guidelines as not altering rights or legal duties but merely requiring the judiciary to consider the guidelines set forth thereunder. "Only in this limited way can the work-product of the Commission, a legislative agency, be given effect beyond the confines of the General Assembly and at the same time avoid invalidation on constitutional grounds." 516 Pa. at 377, 532 A.2d at 781.
Were a similar scheme employed with respect to the IRRC's functions, no constitutional infirmity would lie. However, the IRRC's powers exceed mere disapproval of a regulation. The purported power vested in the IRRC by Sections 6(b) and 7(b) to bar publication of a final order adopting a rule promulgated by the executive transgresses the IRRC's legislative charter of oversight and review.
Although Section 2 of the Act contains a pointed disclaimer that the Act is not intended to create rights or benefits, it is readily apparent that IRRC's action in blocking the required publication of a regulation is an impediment to the executive's rule-making authority inherent in his duty to administer the laws. This the legislature cannot do.
The IRRC's power to disapprove regulations should not, by virtue of its power to interrupt the rule-making process, be given the effect of law so as to alter the legal duty of the executive branch to implement laws. Nothing less than legislation may suffice to override the rule-making power of the EQB or any other executive agency. "Such a result can only be obtained by way of enactment of a law or administration of a law duly enacted." Sessoms, 516 Pa. at 376, 532 A.2d at 781. As the Supreme Court explicitly stated in Bowsher v. Synar, 478 U.S. 714, 733-34, 106 S. Ct. 3181, 3191-92, 92 L. Ed. 2d 583 (1986), "[o]nce Congress makes its choice in enacting legislation, its participation ends. Congress *141 can thereafter control the execution of its enactment only indirectly by passing new legislation."
Moreover, the procedure found in Section 7(b) whereby the IRRC barred publication of the regulations upon the Senate's disapproval, poses serious questions of constitutionality under Article III, Section 9 of our Constitution, requiring bicameral action and gubernatorial presentment. A provision of the Immigration and Nationality Act, 8 U.S.C. § 1254(c)(2), was held to violate the corresponding article of our federal Constitution. Chadha. There, the Supreme Court made clear that Congress could not, by a resolution of either house alone, overrule an Attorney General's order suspending deportation proceedings. This result could be achieved only by enacting legislation in the manner mandated by the Constitution, that is, "passage by a majority of both Houses and presentment to the President." Chadha, 462 U.S. at 958, 103 S.Ct. at 2787.
For these reasons, we grant DER's motion for summary judgment and hold Sections 6(b) and 7(b) of the Act unconstitutional. We find those sections severable from the remainder of the Act and order the respondent Legislative Reference Bureau to forthwith publish the proposed regulatory amendments known as IRRC Regulation No. 7-172.
ORDER
Petitioner Department of Environmental Resources motion for summary judgment in the above-captioned matter is granted. Respondents' cross-motions for summary judgment are hereby denied.
Respondent Legislative Reference Bureau shall forthwith take all necessary steps to direct publication of a final order adopting the regulations referred to herein as IRRC Regulation No. 7-172.
McGINLEY, J., did not participate in the decision in this case.
*142 COLINS, Judge, dissenting.
I dissent. The IRRC is not an arm of the legislature, but instead, is an independent body properly positioned in the executive branch of our government. Its function is to review and approve or disapprove regulations proposed by sister executive agencies. The authority granted to it is simply a logical extension of the delegation of rule-making power to executive agencies by the General Assembly.
Our Supreme Court in Commonwealth v. Sessoms, 516 Pa. 365, 532 A.2d 775 (1987), considered the paramount factor in ascertaining the nature of an agency to be the agency's composition. The specific language of the Regulatory Review Act mandates that no member of the General Assembly or state government shall be appointed as a member of the IRRC. The power to initiate removal of any member lies solely with the Governor. A better guard against control over the members being weighted in favor of the General Assembly cannot seriously be argued. The majority states that the extraordinary power over removal possessed by the Governor does not transform the IRRC into an executive agency. Likewise, the fact that removal may only be effectuated by the consent of the Senate by a two-thirds vote of its members does not transform the IRRC into an arm of the legislature.
I would uphold the constitutionality of the Regulatory Review Act and deny the request to direct publication of the pertinent regulations.
PALLADINO, J., joins in this dissent.
NOTES
[1] The Regulatory Review Act was reenacted and amended by the Regulatory Review Act, Act of June 30, 1989, Act No. 1989-19, P.L. ___. See Pa.Legis.Service No. 2 at 55-70. All references to the Regulatory Review Act are to the act prior to Act No. 1989-19. We shall refer to the new act as Act 1989-19.
[2] The EQB was created under Sections 201, 471, and 1920-A of The Administrative Code of 1929, Act of April 9, 1929, P.L. 177, as amended, 71 P.S. §§ 62,180-1 and 510-20. Section 471, 71 P.S. § 180-1, was added by Section 14 of the Act of December 3, 1970, P.L. 834, as amended; Section 1920-A, 71 P.S. § 510-20, was added by Section 20 of the same act. The EQB has the power and duty to promulgate rules and regulations for the proper performance of the work of DER. EQB exercises the power to adopt rules and regulations previously vested in the Pennsylvania Department of Health and the Air Pollution Commission under the Air Pollution Control Act, Act of January 8, 1960, P.L. 2119 (1959), as amended, 35 P.S. §§ 4001-4015. See Sections 1920-A(c), 1901-A(16) and 1901-A(23) of The Administrative Code of 1929, 71 P.S. §§ 510-20(c), 510-1(16) and 510-1(23).
[3] Act of April 7, 1955, P.L. 23, 71 P.S. §§ 750-1 750-12.
[4] Act of October 15, 1980, P.L. 950, as amended, 71 P.S. § 732-301(10).
[5] See also Immigration and Naturalization Service v. Chadha, 462 U.S. 919, 930, 103 S. Ct. 2764, 2773, 77 L. Ed. 2d 317 (1983), where the United States Supreme Court noted that "INS presented the Executive's views on the constitutionality of the House action to the Court of Appeals." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543571/ | 997 A.2d 1118 (2010)
414 N.J. Super. 238
Donald C. BAYER, Jr., Plaintiff-Appellant,
v.
TOWNSHIP OF UNION, New Jersey, Officer Christopher Donnelly, Officer Robert Donnelly, III, Officer Edward Koster[1], Officer Thomas Ollemar, Officer Carlos Turner, Sergeant Marc A. Bruno, Sergeant J. Dilginis[2], Sergeant Shawn Herrighty, Detective William Fuentes, Detective Thomas Ronan[3], Detective Gregory Rossi, Detective Lieutenant Ronald Berry, and Captain Edward Shapiro[4], Defendants-Respondents.
DOCKET NO. A-1482-07T2.
Superior Court of New Jersey, Appellate Division.
Submitted May 11, 2009.
Decided July 7, 2010.
*1122 Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, Newark, for appellant (John J. Shotter, of counsel and on the brief).
Weiner Lesniak, LLP, Parsippany, for respondent Township of Union (Alan J. Baratz, of counsel and on the brief).
Hoagland, Longo, Moran, Dunst & Doukas, LLP, New Brunswick, for respondents Officer Christopher Donnelly, Officer Robert Donnelly III, Officer Edward *1123 Koster, Officer Thomas Ollemar, Officer Carlos Turner, Sergeant Marc A. Bruno, Sergeant J. Dilginis, Sergeant Shawn Herrighty, Detective William Fuentes, Detective Thomas Ronan, Detective Gregory Rossi, Detective Lieutenant Ronald Berry and Captain Edward Shapiro (Christopher J. Killmurray, of counsel; Matthew G. Rosenfeld, on the brief).
Before Judges CARCHMAN, R.B. COLEMAN and SABATINO.
The opinion of the court was delivered by
R.B. COLEMAN, J.A.D.
Plaintiff Donald C. Bayer, Jr. was arrested for a bank robbery he did not commit, based on a bank teller's misidentification of him at a showup conducted by the Union Township Police Department (the Department) shortly after the crime. Plaintiff sued Union Township (the Township) and the individual police officers involved for false arrest and false imprisonment under the New Jersey Tort Claims Act, N.J.S.A. 59:1-1 to 12-3(TCA), and for violation of his constitutional rights pursuant to 42 U.S.C.A. § 1983. His TCA claims were dismissed after his motion to file a late notice of claim was denied, and his section 1983 claims were dismissed on summary judgment after the court found that there was probable cause for the arrest and that, alternatively, the police officers enjoyed qualified immunity. We affirm.
I.
On the morning of December 19, 2003, Odete Luis was working as head teller at the NorCrown Bank on Colonial Avenue in Union Township. A man walked up to her window and gave her a bag with a note that read: "PLACE ALL THE MONEY IN THE BAG. NO DYE, TEAR GAS OR BAIT MONEY. YOU HAVE 10 SECONDS." According to the statement that Luis subsequently gave to Detective Gregory Rossi at headquarters, the robber was a short white male, approximately five feet five inches tall, and between nineteen and twenty-three years of age. He was wearing a blue windbreaker jacket and a blue baseball cap pulled down over his eyes. When he raised his head, Luis saw that he had "mean eyes." He was clean-shaven, and Luis did not recall having seen him in the bank before. After Luis put the money from both her drawers into the man's bag and gave it to him, he quickly left the bank. Luis then yelled to her manager that she had been robbed and pushed the security button.
Kimberly Cornacchia was working at the drive-up window that day. Prior to the robbery, she had observed the robber walking down the street toward the bank. She noticed him because he looked like a "thug"; however, she did not notice anything out of the ordinary while he was in the bank. After Luis said she was robbed, Cornacchia called 9-1-1.
The Union Township Police Department received the call at 9:23 a.m. and broadcast it over the radio to its officers. Officer Edward Koster was the first to arrive at the scene of the crime. He spoke to Luis and Cornacchia and to the bank manager, Lu Vallejo. Detective Lieutenant Ronald Berry also responded to the scene and was the ranking supervisor in charge of the investigation. He was present when Luis gave her description of the robber, which was largely consistent with the description she later gave in her statement at headquarters. Both Koster and Rossi questioned Luis.
At about 9:30 a.m., Officer Christopher Donnelly was in a patrol car when he was "high-beamed" by a driver, who identified himself as Willie Coley, an off-duty police detective from Orange, and asked if a bank robbery had just occurred. Coley related *1124 to C. Donnelly[5] that he had just been at NorCrown Bank to use its ATM and had noticed a white male wearing a baseball hat with money stuffed in his pockets. Coley told C. Donnelly that the man fled in an older model midsize gray or black vehicle.
According to the formal statement that Coley later gave to Sergeant Joseph Dilginis, he had observed money coming out of the top of a bag that the man was holding. The man turned his head away from Coley, walked past him and then got into a dark-colored vehicle approximately one hundred yards away on Colonial Avenue.
C. Donnelly broadcast the information that he received from Coley to other units on the road. About thirty minutes later, Hillside Township police detained a suspect at a location approximately four to five minutes from the bank by car. Union Township Officers Thomas Ollemar and Peter Simon were dispatched to that location in Hillside and stayed until Sergeant Shawn Herrighty arrived. The Hillside officers who were with plaintiff told Herrighty that they had been on patrol when they saw a car matching the description given over the broadcast. When they pulled up behind it, the driver, later determined to be plaintiff, took off one hat and put on a different type of hat. They ultimately detained him.
According to plaintiff, he left his house at approximately 9:25 a.m. that morning, driving a 1989 gray Chevy Caprice. He was wearing gray sweatpants, a red sweatshirt, sneakers, a dark blue winter coat, and a blue winter cap. As he observed a Hillside police car coming up behind him, he removed his cap, merely as a nervous reaction. Although there was a green baseball cap with a Sierra Mist logo on the front seat of his car, plaintiff had not worn it that day.
According to Berry, he, Rossi, and Captain Edward Shapiro, made the decision to have the three witnessesLuis, Cornacchia, and Coleytransported to the Hillside location where plaintiff was detained to see if they could identify him as the robber. According to Shapiro, who was the most senior officer at the scene but not the officer in charge of the investigation, it was "standard operating procedure" to take a witness to view a suspect if the suspect has been stopped "right after a crime." Although Shapiro was not sure if that standard procedure was written down anywhere, he claimed that he had been trained that way and that the case law supported it.
Shapiro maintained that a "fresh crime" required the prompt display of a suspect to a witness. He defined a fresh crime as one where the crime had just occurred, the suspect had fled and then someone was apprehended "within tens of minutes."
Three separate Union Township police officers transported each of the three witnesses to Hillside to view plaintiff. Plaintiff was wearing handcuffs during the entire showup procedure. He stood next to Herrighty in front of a patrol unit. Although Herrighty did not recall if plaintiff was required to wear a baseball cap, plaintiff claimed that he was required to wear the cap that was found in the front seat of his car. Plaintiff also claimed that, during the procedure, one of the officers on the scene walked arm-in-arm with him for about twenty feet.
Berry was assigned to take Luis to the showup. According to his deposition testimony and his police report, he told Luis *1125 while they were en route that she should not feel obliged to identify anybody and that the suspect may or may not be the robber. He also told her to take her time, and he tried to calm her down.
When Berry arrived at the Hillside location, he parked his car about a block away from where plaintiff was situated. He got out of his car to speak to the officers on the scene to determine how the showup was going to be conducted. According to Berry, when he returned to his car, Luis exclaimed, "Oh, my God, that's him. I can't believe you got him so quick." Berry told Luis to take her time and then drove closer to the suspect. After viewing him from a distance of approximately fifteen or twenty feet (a distance that was corroborated by Herrighty), Luis said that plaintiff was the robber, except that his clothes were different. According to Berry, Luis was sure it was him because he had the "same face and those eyes." In the formal signed statement Luis gave to Rossi at headquarters shortly after this identification, Luis stated that she was ninety percent sure that the suspect was the robber.
At her deposition taken on March 15, 2007, more than three years after the robbery, Luis recalled that the police told her that they had found somebody that matched the robber's description, and they wanted to see if she could recognize him. She did not remember what she may have said at the time of confrontation. In particular, she did not remember whether she exclaimed: "Oh, my God, that's him!" She did remember saying that it looked like him, especially the way he was wearing the cap on his head and the way he was walking. Luis recalled that she told Berry: "I don't want to say something that somebody can go to jail if it's not the person." Luis claimed in her deposition that she was not confident that plaintiff was the robber and that she conveyed that lack of confidence to the police. Specifically, she said she told both Berry on the scene and Rossi back at headquarters that she was not one hundred percent sure.
Sergeant Marc Bruno was assigned to take Cornacchia to the Hillside location. Cornacchia told Bruno that she could not identify plaintiff as the person who robbed the bank, and Bruno conveyed that fact to Berry. As Bruno turned his car around to take Cornacchia back to the bank, she asked him, "Is that Don Bayer?" When Bruno asked how she knew him, she said that he was a bank customer and also had been a substitute teacher when she was in high school. Bruno believes that he relayed that information to Rossi. Cornacchia also gave an official statement in which she confirmed that she could not identify plaintiff as the robber at the showup.
C. Donnelly was assigned to take Coley to the Hillside location. Donnelly pulled his car close enough so that Coley could get a clear view of plaintiff, who was leaning up against the trunk of his vehicle. Coley was able to positively identify the vehicle, but said that plaintiff might "possibly" be the robber. According to the formal statement that Coley gave a short time later, plaintiff did not have a hat on and appeared older than the robber, but his jacket and physical appearance were the same. Coley was "pretty sure" it was the same vehicle and claimed that he was able to positively identify it.
Following the showups, Officers Carlos Turner and Robert Donnelly transported plaintiff to headquarters and read him his rights. According to R. Donnelly's arrest report, plaintiff had straight, collar-length hair, a pale complexion, and a thin build. He was five feet ten inches tall, weighed 160 pounds, and was thirty-seven years old. According to Officer Turner's property report, plaintiff had $47 in cash on his person when arrested.
*1126 Later that afternoon, Rossi and Officer Thomas Ronan conducted a search of the house where plaintiff lived with his mother, after obtaining his mother's consent. The officers did not find any cash in the house; nor did they find a blue jacket or a blue baseball hat.
After returning to headquarters, at approximately 2:00 p.m., Rossi signed a complaint warrant charging plaintiff with second-degree robbery, relying on the oral statements of the officers involved in the case. He did not read their official reports until later. Rossi also relied on the statement that Luis provided at headquarters, in which she said she was ninety percent certain that plaintiff was the robber.
Rossi admitted that he had no knowledge of how the showups had been conducted. Although he was aware of Luis's initial description of the robber, Rossi never actually looked at plaintiff before signing the complaint to see if he fit that description. According to Rossi, the fact that Luis made a positive identification was more important than her verbal description of the suspect. In addition, Rossi relied on the fact, which he learned from Berry, that plaintiff had made a statement to R. Donnelly that he had been at the bank earlier in the day (plaintiff later claimed he never made that statement).
After Rossi signed the complaint warrant, he read Roster's report and determined that certain inconsistencies in the investigation deserved further inquiry. He decided to undertake a reassessment of the evidence and reviewed a compact disc version of the bank's videotape of the robbery. Earlier that day, Rossi had viewed the security tape at the bank with the bank's security officer but had not been able to zoom in on the robber. Once he was able to zoom in on the perpetrator's face, Rossi immediately noticed that the robber had short hair, whereas plaintiff had longer hair.
Rossi conveyed his doubts to Berry and another superior officer. He also called a judge, who instructed him to call the county prosecutor. The assistant prosecutor told Rossi to release plaintiff on his own recognizance and to set up a polygraph test. At approximately 8:30 p.m., Rossi took a statement from plaintiff and told him about the doubts the police were having. Plaintiff said he was willing to take a polygraph test. The police then released plaintiff.
According to plaintiff, several days after he was released, he spoke to a lawyer, who told him not to submit to a polygraph test given by the police. Instead, plaintiff took a polygraph test at his lawyer's office but did not immediately give the results to the police. Rossi made numerous unsuccessful attempts to set up a polygraph test, and on February 6, 2004, Rossi received a call from plaintiff's attorney, who said he would contact the assistant prosecutor to discuss the polygraph test. On March 24, 2004, plaintiff's lawyer advised him that the prosecutor would drop the charges against him if he took another polygraph test and passed it. However, some time in May, the prosecutor agreed to look at the results from the test plaintiff had already taken. On June 26, 2004, the prosecutor filed a notice of dismissal and closed the case.[6]
On September 24, 2004, plaintiff filed a notice of claim with the State, Union County, the Union County Prosecutor's Office, Union Township, and Hillside Township, advising these entities of his claims for false arrest, false imprisonment, malicious prosecution, and negligent infliction of *1127 emotional distress as the result of an incident that occurred on December 19, 2003. On December 17, 2004, these parties appeared before Judge John F. Malone on plaintiff's motion for leave to file a late notice of claim. The parties recognized that the motion pertained only to plaintiff's ability to pursue a state law claim for false arrest. After hearing argument, Judge Malone denied the motion.
On the same day, plaintiff filed a complaint in Superior Court, Law Division, Union County, against the State of New Jersey, Union County, Union Township, and Hillside Township, alleging violation of his federal civil rights pursuant to 42 U.S.C.A. § 1983, violation of his state civil rights pursuant to N.J.S.A. 10:6-2, malicious prosecution, and false arrest. In its answer, the Township asserted that plaintiff's claim for false arrest was barred by his failure to comply with the notice provisions of the TCA, in accordance with Judge Malone's order.
On April 25, 2005, plaintiff filed an amended complaint, which asserted the same claims against the original defendants, but also added the Union County Prosecutor's Office as a public entity defendant and added thirteen Union Township police officers and four Hillside Township police officers as individual defendants. On May 5, 2006, the parties apparently stipulated as to the dismissal of defendant Detective William Fuentes, one of the Union Township police officers; however, Fuentes was named as a defendant on the notice of appeal subsequently filed.
Plaintiff moved to compel the Township to produce personnel files and internal affairs complaints against the individually named police officers. Judge Ross R. Anzaldi heard argument on that motion and entered an order requiring the Township to provide plaintiff with some of the documents and requiring that others be delivered to the court for an in camera review. On October 23, 2006, Judge Anzaldi ruled that none of the documents he reviewed in camera needed to be provided to plaintiff. On December 15, 2006, after hearing argument on plaintiff's motion for reconsideration of this ruling, the judge denied the motion.
Thereafter, Judge Anzaldi heard argument on the summary judgment motions brought by the Township and the individual Union Township police officers named in this appeal.[7] The court granted the motions as to the named defendants and signed an order granting summary judgment and dismissing the claims against all the individual police officers: Officers C. Donnelly, R. Donnelly, Koster, Ollemar, and Turner; Sergeants Bruno, Dilginis, and Herrighty; Detectives Fuentes, Ronan, and Rossi; Detective Lieutenant Berry; and Captain Shapiro. On October 5, 2007, the court granted the Township's motion for summary judgment. On November 15, 2007, Judge Anzaldi denied plaintiff's motion for reconsideration of the orders granting summary judgment.
Plaintiff filed a notice of appeal from Judge Malone's order of December 17, 2004, and from Judge Anzaldi's orders of September 20, 2007, October 5, 2007, and November 15, 2007. Plaintiff contends that disputed issues of fact should have precluded the court from granting summary judgment and that the trial court wrongfully denied discovery, which plaintiff believes would have established a policy or custom of following improper investigative procedures.
*1128 In support of that contention, plaintiff points to evidence demonstrating that all of the individual defendants who were deposed in this case admitted that they had been trained on how to conduct identification procedures, but not necessarily on how to conduct a showup. Their training occurred either when they were at the police academy or from informal sessions conducted at police headquarters, especially when new guidelines from the Attorney General or prosecutor were issued. These defendants admitted that they had never conducted a live lineup procedure (as opposed to a showup, in which the police present a single suspect to the witness), and that the Department had no facility in which to conduct a live lineup. These officers further admitted that only detectives conducted photo arrays.
In addition, Captain Ricky Landolfi, who was in charge of administration for the Department, admitted that the Department had no regulation, written policy, or informal policy regarding how showups were to be conducted, and that there was no formal training regarding showups. He maintained that if there was a need to establish probable cause for an arrest, then a showup should be done on the street.
Francis Murphy, plaintiff's law enforcement expert, submitted a report in which he concluded that there were no exigent circumstances in this case that mandated an immediate showup of plaintiff to the witnesses. In addition, he opined that the suggestive nature of the showups failed to meet the procedural safeguards promulgated by the International Association of Chiefs of Police, the United States Attorney General, and the New Jersey Attorney General. Murphy also faulted Rossi for not knowing the circumstances under which the showups were conducted before signing the complaint.
Murphy also expressed his opinion that the police charged plaintiff "absent any credible evidence of his involvement in the robbery." He believed that the police should have looked at the enhanced version of the bank surveillance tape before charging him. He claimed that the police ignored evidence that should have excluded plaintiff as a suspect.
II.
Plaintiff argues on appeal that the court wrongfully denied his motion to file a late tort claims notice because there were extraordinary circumstances justifying the delay and because defendants would not have been substantially prejudiced by the late filing. We disagree.
According to pertinent provisions of N.J.S.A. 59:8-8:
A claim relating to a cause of action for death or for injury or damage to person or to property shall be presented as provided in this chapter not later than the ninetieth day after accrual of the cause of action. After the expiration of six months from the date notice of claim is received, the claimant may file suit in an appropriate court of law. The claimant shall be forever barred from recovering against a public entity or public employee if:
a. He failed to file his claim with the public entity within 90 days of accrual of his claim except as otherwise provided in section 59:8-9. . . .
Pursuant to N.J.S.A. 59:8-9, a failure to comply with the provisions of N.J.S.A. 59:8-8 is only forgiven upon a showing of "extraordinary circumstances":
A claimant who fails to file notice of his claim within 90 days as provided in section 59:8-8 of this act, may, in the discretion of a judge of the Superior Court, be permitted to file such notice at *1129 any time within one year after the accrual of his claim provided that the public entity or the public employee has not been substantially prejudiced thereby. Application to the court for permission to file a late notice of claim shall be made upon motion supported by affidavits based upon personal knowledge of the affiant showing sufficient reasons constituting extraordinary circumstances for his failure to file notice of claim within the period of time prescribed by section 59:8-8 of this act or to file a motion seeking leave to file a late notice of claim within a reasonable time thereafter; provided that in no event may any suit against a public entity or a public employee arising under this act be filed later than two years from the time of the accrual of the claim.
The purposes of these notice provisions are to: allow the public entity sufficient time to settle claims prior to the commencement of suit; give the public entity prompt notification so that it may investigate the facts while they are still fresh; afford the public entity the chance to correct the conditions which gave rise to the claim; and inform the public entity in advance of any liability it may incur. Beauchamp v. Amedio, 164 N.J. 111, 121-22, 751 A.2d 1047 (2000). "In determining whether a notice of claim under N.J.S.A. 59:8-8 has been timely filed, a sequential analysis must be undertaken." Id. at 118, 751 A.2d 1047. First, it must be determined when the claim accrued. Ibid. Next, it must be determined whether a notice of claim was filed within ninety days. If not, it must be determined whether extraordinary circumstances justify the late notice. Id. at 118-19, 751 A.2d 1047.
The TCA defines "accrual" as "the date on which the claim accrued." N.J.S.A. 59:8-1. In the case of tortious conduct, the date of accrual is the date of the incident on which the tortious conduct took place. Beauchamp, supra, 164 N.J. at 117, 751 A.2d 1047. "The basis for a claim of false arrest arises at the time the incident occurs, i.e., the time of arrest." Bauer v. Borough of Cliffside Park, 225 N.J.Super. 38, 47, 541 A.2d 719 (App.Div.), certif. denied, 113 N.J. 330, 550 A.2d 447 (1988). "[A] requirement that the criminal proceeding has terminated in plaintiff's favor is not a prerequisite for institution of an action for false arrest[.]" Pisano v. City of Union City, 198 N.J.Super. 588, 593, 487 A.2d 1296 (Law Div.1984).
Where a claim is not filed within ninety days of accrual, a court must determine whether the plaintiff alleged extraordinary circumstances justifying the delay and whether the public entity or employee will be substantially prejudiced by the delay. Lamb v. Global Landfill Reclaiming, 111 N.J. 134, 146-47, 543 A.2d 443 (1988). "The granting or denial of permission to file a late claim . . . is a matter left to the sound discretion of the trial court, and will be sustained on appeal in the absence of a showing of an abuse thereof." Id. at 146, 543 A.2d 443. However, an appellate court will "examine `more carefully cases in which permission to file a late claim has been denied than those in which it has been granted[.]'" Feinberg v. N.J. Dep't of Envtl. Prot., 137 N.J. 126, 134, 644 A.2d 593 (1994) (quoting S.E.W. Friel Co. v. N.J. Tpk. Auth., 73 N.J. 107, 122, 373 A.2d 364 (1977)). Any doubts should be resolved in favor of the application so that cases may be heard on their merits. Ibid.
The requirement of "extraordinary circumstances" was added to the statute in 1994, with the purpose to "raise the bar for the filing of late notice" to a "`more demanding'" standard. Beauchamp, supra, 164 N.J. at 118, 751 A.2d 1047 (quoting Lowe v. Zarghami, 158 N.J. 606, 625, 731 A.2d 14 (1999)). The 1994 amendment *1130 "`may have signaled the end to a rule of liberality' in filing." Ibid. (quoting Lowe, supra, 158 N.J. at 626, 731 A.2d 14). "Ignorance of the 90-day statutory requirement, ignorance of one's rights or mere ambivalence by the claimant have never been found to be sufficient reasons on their own to allow late filing." Escalante v. Twp. of Cinnaminson, 283 N.J.Super. 244, 250, 661 A.2d 837 (App.Div.1995). Although an attorney's negligence may have been sufficient prior to the 1994 amendment to allow a late filing, under the current version of the statute, if such negligence is the sole basis for the late notice, the claim against the public entity will be lost. Zois v. N.J. Sports & Exposition Auth., 286 N.J.Super. 670, 674, 670 A.2d 92 (App.Div.1996).
The undisputed facts established that plaintiff was arrested on December 19, 2003, that he was released the same day, that the complaint against him was dismissed on June 30, 2004, and that his notice of claim was filed on September 24, 2004. In denying plaintiff's motion, the court noted that plaintiff was asserting three reasons for his late notice: (1) his concern having the criminal charge dismissed before he could file the notice of claim; (2) his desire not to antagonize law enforcement officials while his criminal charge was still pending; and (3) his belief, based on the advice of his prior counsel, that his cause of action did not accrue until the criminal charge was resolved.
As noted above, the law is well settled that a claim for false arrest accrues on the date of the arrest. Bauer, supra, 225 N.J.Super. at 47, 541 A.2d 719. Hence, it is without dispute that plaintiff's claim was filed beyond the ninety-day period. We agree with the trial court that plaintiff's desire to obtain a dismissal of the criminal charge before filing a notice of claim and his desire not to aggravate law enforcement officials did not constitute extraordinary circumstances so as to excuse his late filing. This was not a situation where plaintiff was incarcerated, disabled, or otherwise physically incapable of protecting his rights during the ninety-day period following accrual. He was at liberty during the entire time. We hold that plaintiff's reluctance to aggravate law enforcement officials reflects ambivalence about filing a claim. It is well established that "indecision" or "mere ambivalence" about whether to prosecute a claim do not constitute extraordinary circumstances necessary to create a basis for relief. Lutz v. Twp. of Gloucester, 153 N.J.Super. 461, 466, 380 A.2d 280 (App.Div.1977). Accordingly, we reject defendant's first two arguments on that basis.
Plaintiff further argues that extraordinary circumstances arose out of the fact that his prior counsel misled him into believing that his claim did not accrue until the criminal complaint was dismissed. Plaintiff relies on Beauchamp, where the plaintiff had been injured in an accident with a New Jersey Transit bus and was advised by his attorney "not to file a notice of claim under the [TCA] because her injuries did not appear serious enough to satisfy the permanency requirements necessary to recover non-economic damages" under the statute. Supra, 164 N.J. at 114, 751 A.2d 1047. After the injuries revealed themselves to be more severe than originally believed, the plaintiff moved to file a late notice of claim and was denied relief. Id. at 115, 751 A.2d 1047.
The Supreme Court held that the plaintiff had, in fact, demonstrated "extraordinary circumstances" due to the confusion surrounding how the permanency requirement affected the issue of accrual at the time that the plaintiff consulted with her attorney. Id. at 122-23, 751 A.2d 1047. The Court emphasized that the plaintiff's attorney had relied on a published Appellate *1131 Division case that had rulederroneously according to the Beauchamp Courtthat a claim does not accrue until medical evidence of permanency is obtained. Id. at 120-21, 751 A.2d 1047. The Court emphasized that extraordinary circumstances were present due to the "general confusion among lawyers and judges" relative to the concept of accrual, "including a published Appellate Division opinion[.]" Id. at 123, 751 A.2d 1047.
We are convinced that plaintiff's reliance on Beauchamp is misplaced. Unlike the attorney in Beauchamp, plaintiff's prior counsel here did not rely on a published Appellate Division opinion in giving his client wrong advice regarding accrual. Nor was this a case where there was general confusion among attorneys and judges regarding accrual of a cause of action for false arrest. Hence, this case is more akin to general claims of ignorance of the law and attorney negligence, neither of which have been held to constitute extraordinary circumstances so as to justify a late filing.
III.
Plaintiff next argues that the court erred in dismissing his section 1983 claims against the individual officers because there were questions of fact that should have been submitted to a jury regarding whether defendants had probable cause to arrest him and whether defendants were entitled to qualified immunity. We reject that argument.
According to 42 U.S.C.A. § 1983:
Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress, except that in any action brought against a judicial officer for an act or omission taken in such officer's judicial capacity, injunctive relief shall not be granted unless a declaratory decree was violated or declaratory relief was unavailable. For the purposes of this section, any Act of Congress applicable exclusively to the District of Columbia shall be considered to be a statute of the District of Columbia.
To establish a claim under this section, a plaintiff must prove that the "defendants acted under color of state law and deprived him of a well-established federal constitutional or statutory right." Wildoner v. Borough of Ramsey, 162 N.J. 375, 385, 744 A.2d 1146 (2000). A government official is entitled to qualified immunity from liability for civil damages under section 1983 unless his conduct violated "clearly established statutory or constitutional rights of which a reasonable person would have known." Harlow v. Fitzgerald, 457 U.S. 800, 818, 102 S.Ct. 2727, 2738, 73 L.Ed.2d 396, 410 (1982). A right is clearly established when it is sufficiently clear that a reasonable official would understand that his act violates that right. Anderson v. Creighton, 483 U.S. 635, 640, 107 S.Ct. 3034, 3039, 97 L.Ed.2d 523, 531 (1987). It is not necessary for the plaintiff to prove that the precise act in question was previously held to be unlawful. Rather, the appropriate inquiry is whether the law was apparent in relation to specific facts confronting the defendants when they acted. Ibid.
Where the basis for a plaintiff's claim is false arrest or imprisonment, the existence of probable cause will be an absolute defense. Wildoner, supra, 162 N.J. at 389, 744 A.2d 1146. "The qualified immunity defense . . . `protects all officers but the plainly incompetent or those who *1132 knowingly violate the law.'" Bernstein v. State, 411 N.J.Super. 316, 340, 986 A.2d 22 (App.Div.2010) (quoting Connor v. Powell, 162 N.J. 397, 409, 744 A.2d 1158, cert. denied sub nom. Badgley v. Connor, 530 U.S. 1216, 120 S.Ct. 2220, 147 L.Ed.2d 251 (2000)). Accordingly, a police officer will be entitled to judgment if he can demonstrate either that he acted with probable cause or, "`even if probable cause did not exist, that a reasonable police officer could have believed in its existence.'" Schneider v. Simonini, 163 N.J. 336, 355, 749 A.2d 336 (2000) (quoting Kirk v. City of Newark, 109 N.J. 173, 184, 536 A.2d 229 (1988)).
Probable cause is "more than mere suspicion but less than legal evidence necessary to convict." Sanducci v. City of Hoboken, 315 N.J.Super. 475, 480, 719 A.2d 160 (App.Div.1998). It is a "well-grounded" suspicion that an offense has been committed. State v. Moore, 181 N.J. 40, 45, 853 A.2d 903 (2004). "Probable cause exists where `the facts and circumstances within their [the officers'] knowledge and of which they had reasonably trustworthy information [are] sufficient in themselves to warrant a man of reasonable caution in the belief that' an offense has been or is being committed." Brinegar v. United States, 338 U.S. 160, 175-76, 69 S.Ct. 1302, 1310-11, 93 L.Ed. 1879, 1890 (1949) (alterations in original) (quoting Carroll v. United States, 267 U.S. 132, 162, 45 S.Ct. 280, 288, 69 L.Ed. 543, 555 (1925)); accord, Moore, supra, 181 N.J. at 46, 853 A.2d 903. In determining whether probable cause existed, a court should consider the "totality of the circumstances," Moore, supra, 181 N.J. at 46, 853 A.2d 903, including the police officer's "`common and specialized experience.'" Schneider, supra, 163 N.J. at 362, 749 A.2d 336 (quoting State v. Contursi, 44 N.J. 422, 431, 209 A.2d 829 (1965)).
In this case, the trial court found that, based on the positive identification of plaintiff made by Luis and the positive identification of plaintiff's car by Coley, the police officers had probable cause or, at least, a sufficient basis to believe that probable cause existed to arrest plaintiff and to charge him with bank robbery. Plaintiff nevertheless asserts that summary judgment was inappropriate because there were factual questions regarding whether Luis positively identified him and regarding whether the showup procedure was conducted in an impermissibly suggestive manner. We reject this argument.
The case law is clear that probable cause and qualified immunity are legal questions to be decided by a judge, and not a jury. Qualified immunity is an immunity from suit rather than a defense to liability; the benefit of the immunity is effectively lost if the case is allowed to go to trial. Mitchell v. Forsyth, 472 U.S. 511, 526, 105 S.Ct. 2806, 2815, 86 L.Ed.2d 411, 425 (1985). Thus, "a defendant's entitlement to qualified immunity is a question of law to be decided [as] early in the proceedings as possible, preferably on a properly supported motion for summary judgment[.]" Wildoner, supra, 162 N.J. at 387, 744 A.2d 1146. Where probable cause is the issue, the trial judge should decide "whether probable cause existed as a matter of law, and if not, whether the [defendant] could have reasonably believed in its existence." Schneider, supra, 163 N.J. at 359, 749 A.2d 336. However,
[w]here historical or foundational facts that are critical to those determinations are disputed, the jury should decide those disputed facts on special interrogatories. The jury's role should be restricted to the who-what-when-where-why type of historical fact issues. Based on the jury's factual findings, the trial judge must then make the legal *1133 determination of whether qualified immunity exists.
[Ibid. (internal quotation and citation omitted.)]
Here, plaintiff argues that there were critical facts in dispute regarding what Luis said and did when she identified him at the showup. For example, Luis acknowledged at her subsequent deposition that she did not remember exclaiming "Oh my God, that's him, I can't believe you got him so quickly" at the showup. Luis also stated that she was not certain of her identification of plaintiff at the time she made it. She believed that she had conveyed that uncertainty to the police.
These disputed facts do not directly challenge those relied upon by the trial court, however. Critically, plaintiff has never challenged the fact that on the day of plaintiff's arrest Luis provided a statement to police expressing that she was ninety percent certain about her identification of plaintiff as the robber. Luis provided a statement directly to Rossibefore Rossi signed the complaint against plaintiffin which she recounted that she immediately identified plaintiff when she was driven to the Hillside location and that, after getting closer, she was ninety percent sure that plaintiff was the man who robbed her. Hence, even if Luis later recanted her identification in its entirety, the fact remains that her ninety percent certainty provided Rossi with a reasonable basis for believing that probable cause existed when he signed the complaint. As the trial court properly noted, probable cause is determined at the time the police officer acts, and not on the basis of twenty-twenty hindsight.
Plaintiff also argues that because the showup identification procedure was impermissibly suggestive, his arrest, which was premised on the identification, deprived him of his constitutional rights and gives rise to police liability under section 1983. Plaintiff believes the identification was impermissibly suggestive because he was in handcuffs, standing next to a patrol car and at least one police officer, and was forced to wear a hat that was similar to the one worn by the robber. He argues that these procedures violated the Attorney General Guidelines for Preparing and Conducting Photo and Live Lineup Identification Procedures (Guidelines), which appear in the appendix to our Supreme Court's opinion in State v. Herrera, 187 N.J. 493, 511-20, 902 A.2d 177 (2006).
At the outset, we note that although the guidelines apply to both photographic and live lineups, they do not specifically address showups. Ibid. Consequently, we need not apply the presumption of impermissible suggestiveness for departures from the Guidelines, as we did in State v. Henderson, 397 N.J.Super. 398, 415, 937 A.2d 988 (App.Div.), certif. granted and denied, 195 N.J. 521, 950 A.2d 907 (2008), remanded by 2009 WL 510409, 2009 N.J. Lexis 45 (Feb. 26, 2009) (order remanding for a hearing before Special Master to determine whether the Brathwaite test "remain[s] valid and appropriate in light of recent scientific and other evidence[.]").[8] Nor do we need to address whether the Henderson presumption, which was designed for criminal cases, has any applicability to a civil action such as the present matter.
The admissibility of showup evidence is governed by the same two-step analysis applicable to any identification procedure, as set forth in Manson v. Brathwaite, 432 U.S. 98, 110, 97 S.Ct. 2243, *1134 2251, 53 L.Ed.2d 140, 151 (1977). Herrera, supra, 187 N.J. at 503-04, 902 A.2d 177. Under that analysis, a court first determines whether the procedure was impermissibly suggestive, and then determines whether the identification was nevertheless reliable. Even if the showup was impermissibly suggestive, evidence derived from the showup is admissible if the indicia of reliability outweigh the suggestiveness of the procedure. Id. at 503-04, 902 A.2d 177. Factors to consider in determining reliability include the witness' opportunity to view the suspect when the crime was committed, the degree of attention paid by the witness, the accuracy of the witness' initial description of the suspect, the level of certainty demonstrated by the witness, and the length of time between the crime and the identification. Id. at 503, 902 A.2d 177. Reliability is the lynchpin of the analysis. Ibid.
In the present case, the trial court found that the critical inquiry was not whether the out-of-court identification on which the police relied in arresting plaintiff complied with the two-step analysis governing its admissibility at trial, but rather whether the officers reliance upon it in developing probable cause was reasonable. In other words, it concluded that an impermissibly suggestive showup does not automatically give rise to police liability if the plaintiff was detained based on evidence obtained in the improper showup. Though we have not had occasion to rule on this precise issue, we find that the trial court applied the proper analysis.
Several federal courts have reached the same conclusion. In Hensley v. Carey, the Seventh Circuit affirmed the dismissal on summary judgment of a section 1983 action in which the plaintiff asserted that his due process rights were violated by a suggestive identification procedure that led to his wrongful arrest. 818 F.2d 646, 646 (7th Cir.), cert. denied, 484 U.S. 965, 108 S.Ct. 456, 98 L.Ed.2d 395 (1987). In doing so, the court held that the constitutional rule enunciated in Brathwaite is "a prophylactic rule designed to protect a core right, that is the right to a fair trial, and it is only the violation of the core right and not the prophylactic rule that should be actionable under § 1983." Id. at 649. The purpose of the Brathwaite rule, according to the Seventh Circuit, is to "insure that only reliable identification evidence is admitted at trial. [It] . . . does not establish a right to an impartial lineup so long as the evidence gained through that lineup is not used at trial." Id. at 650.
In Pace v. City of Des Moines, the Eighth Circuit, on similar facts, held that "in the context of unduly suggestive lineups, only a violation of the core rightthe right to a fair trialis actionable under § 1983." 201 F.3d 1050, 1055 (8th Cir. 2000). The court considered the Brathwaite factors in the context of the allegedly suggestive lineup procedure, but only to answer the ultimate question of whether the eyewitness identification that resulted from the procedure "was sufficiently probative to allow a reasonable officer to believe that probable cause existed." Id. at 1057; cf. Torres v. City of Los Angeles, 548 F.3d 1197, 1209 (9th Cir.2008) (reversing a grant of summary judgment entered against a plaintiff who brought a section 1983 claim alleging that his rights had been violated in part by an unduly suggestive identification procedure because the procedure was insufficiently reliable for a reasonable officer to have determined that probable cause existed), cert. denied, ___ U.S. ___, 129 S.Ct. 1995, 173 L.Ed.2d 1086 (2009).
Applying these principles here, we are satisfied that plaintiff's section 1983 claim, premised as it was on an allegation that defendants lacked probable cause to charge him with robbery and therefore *1135 violated his Fourth Amendment rights, was appropriately dismissed. Though plaintiff frames his argument within the context of the purportedly suggestive showup, the standard for qualified immunity is one of "objective reasonableness, which is a lesser standard than required for probable cause." Schneider, supra, 163 N.J. at 365, 749 A.2d 336. It has been observed that "[t]he only time that standard is not satisfied is when, `on an objective basis, it is obvious that no reasonably competent officer would have concluded that a warrant should issue.'" Id. at 366, 749 A.2d 336 (quoting Malley v. Briggs, 475 U.S. 335, 341, 106 S.Ct. 1092, 1096, 89 L.Ed.2d 271, 278 (1986)).
Accepting the facts in the light most favorable to plaintiff, as we must on a summary judgment motion, Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 536, 666 A.2d 146 (1995), we hold that a reasonable officer would have concluded that a warrant should issue if confronted with the facts known by the various officers. Even though plaintiff's showup may have been somewhat suggestive plaintiff was placed before the witness in handcuffs and was purportedly forced to wear a hat found in his possession that resembled the robber's (which arguably gave the witness less of a chance to ascertain the plaintiff's physical features)it was not extraordinarily so.
We reach that conclusion because plaintiff has not alleged that the officers used suggestive language when presenting him to either of the identifying witnesses, because the positive identifications occurred a short time after the crime, and because it appears that the prompt roadside showup was motivated by a desire not to detain an innocent person. See State v. Romero, 191 N.J. 59, 78, 922 A.2d 693 (2007). Moreover, Luis was face-to-face with, and therefore had an excellent opportunity to view, the perpetrator at the time of the robbery; she later exhibited a high level of certainty (ninety percent) of her positive identification following the showup. We also note that the Supreme Court has noted the mere fact that a suspect is presented in or around a police car in handcuffs does not in itself make a showup impermissibly suggestive. Ibid.
More importantly, the officers responded reasonably in attempting to bring a fleeing bank robber to justice. Rossi, the officer who signed the complaint warrant at 2:00 p.m. on the day of the robbery, was the same officer who interviewed Luis at the police station two hours earlier and took her signed, sworn statement. In that statement (which is produced in the record in its entirety), Luis expressed none of the reservations that she allegedly expressed to Officer Berry at the showup. Rather, Luis indicated that she was ninety percent sure that plaintiff was the robber, based on her viewing of him at the showup. In Coley's sworn statement, he positively identified plaintiff's car as the vehicle used by the bank robber. Obviously, Coley's statement corroborated Luis's statement. We find that a reasonable police officer, when confronted with those statements, would have believed probable cause existed.
There was nothing unreasonable about the decision, allegedly made by Berry, Rossi, and Shapiro, to conduct an immediate showup after plaintiff's car was stopped by the Hillside Police. Showups are not per se violative of a defendant's constitutional rights, and they are often the most expedient way to exonerate a suspect. Romero, supra, 191 N.J. at 78, 922 A.2d 693. Unfortunately for plaintiff, he was not exonerated because he happened to be driving a car very similar to that driven by the bank robber and was positively identified by one of the eyewitnesses. That misfortune is not a basis for *1136 liability on the part of the arresting police officers.
Accordingly, we affirm the grant of summary judgment with regard to all of the individual defendants. The involvement of certain of them was plainly de minimis or innocuous. For example, defendant Turner did nothing more than transport plaintiff to headquarters from the Hillside location. Defendant Dilginis merely took a statement from Coley. Although defendant Ollemar reported to the Hillside location, he did not witness or participate in the showups. Defendant Ronan merely participated in a search of plaintiff's house, a search that plaintiff did not challenge.
While the involvement of the other officers was more complex, there is no evidence to support the view that any of them engaged in conduct that was not objectively reasonable under the circumstances. Even though some of the officers may have been aware of information that weakened the probable cause against plaintiff e.g., Cornacchia's statement that she recognized plaintiff as a bank customer, Luis's initial description of the robber as shorter and younger than plaintiff, or the fact that no physical evidence was discovered in plaintiff's car or home linking him to the crimenone of that evidence was dramatic enough to call the whole case against plaintiff into question at such an early stage, given the strength of the positive identifications. We find that plaintiff has not established that any of the officers received information or engaged in conduct that would have caused a reasonable officer to sound bells of alarm about the investigation or the reliability of the showup.
IV.
We also reject plaintiff's contention that the summary judgment entered in favor of the Township should be reversed. A local governmental entity is deemed a "person" under section 1983 only where the action alleged to be unconstitutional "implements or executes a policy statement, ordinance, regulation, or decision officially adopted and promulgated by that body's officers." Monell v. Dep't of Soc. Servs. of N.Y., 436 U.S. 658, 690, 98 S.Ct. 2018, 2035-36, 56 L.Ed.2d 611, 635 (1978); accord Stomel v. City of Camden, 192 N.J. 137, 145, 927 A.2d 129 (2007). It is not, however, liable for the actions of its employees solely on a theory of respondeat superior. Stomel, supra, 192 N.J. at 145, 927 A.2d 129. It is only when "execution of a government's policy or custom . . . inflicts the injury that the government as an entity is responsible under § 1983." Monell, supra, 436 U.S. at 694, 98 S.Ct. at 2037-38, 56 L.Ed.2d at 638. The "official policy" requirement of Monell was intended to limit a municipality's liability to actions for which the municipality is actually responsible, i.e., acts which the municipality officially sanctioned or ordered. Stomel, supra, 192 N.J. at 145-46, 927 A.2d 129.
"[T]here are limited circumstances in which an allegation of a `failure to train' can be the basis for liability under § 1983." City of Canton v. Harris, 489 U.S. 378, 387, 109 S.Ct. 1197, 1204, 103 L.Ed.2d 412, 426 (1989). "[T]he inadequacy of police training may serve as the basis for § 1983 liability only where the failure to train amounts to deliberate indifference to the rights of persons with whom the police come into contact." Id. at 388, 109 S.Ct. at 1204, 103 L.Ed.2d at 426. "Only where a failure to train reflects a `deliberate' or `conscious' choice by a municipality .. . can a city be liable for such failure under § 1983." Id. at 389, 109 S.Ct. at 1205, 103 L.Ed.2d at 427.
In this case, plaintiff emphasizes deposition testimony of members of the Department indicating an absence of any policy or *1137 particularized training on how to conduct showup identifications. Plaintiff further urges that showup identification procedures are virtually automatic when a suspect is detained within a brief time after the commission of a crime. Accepting the premises of those arguments as true, they do not establish any link between the absence of valid procedures and the asserted violation of section 1983. Showup identifications are not per se violative of the suspect's statutory or constitutional rights; and where, as here, the actions of the police are based upon the witness' assessment (to an estimated ninety percent certainty) that the suspect is the perpetrator, there is no basis to withhold or to overturn summary judgment in favor of the Township.
V.
Plaintiff argues that he was wrongfully denied discovery that was critical to his claims against the Township. We disagree.
On October 23, 2006, Judge Anzaldi wrote to both parties after having reviewed the psychological evaluations of defendants C. Donnelly, Koster, Herrighty, Ronan, and Berry, and the Internal Affairs complaints and investigative reports regarding the same. The judge was satisfied that "no information in the psychological evaluations, which found all officers fit for duty, nor in the Internal Affairs Complaints are worthy of discovery." The Internal Affairs complaints dealt with investigations of citizens' complaints "ranging from complaints as to demeanor, investigatory style and personality conflicts. In no instance do any pertain to inquiries of false arrest, imprisonment nor violation of anyone's civil rights."
On December 15, 2006, Judge Anzaldi heard argument on plaintiff's motion for reconsideration of his ruling. The judge clarified that Internal Affairs complaints regarding "demeanor" meant that a police officer was accused of not being polite or comforting; no complaint had anything to do with violating a citizen's civil rights during arrest. Plaintiff, however, asserted that he had the right to look at how investigations into complaints were conducted. The court responded that this would be true only with respect to complaints that alleged improper arrest. The court had independently reviewed all of these files and found nothing of relevance to plaintiff's litigation. Accordingly, it found no basis for reconsidering its decision.
Our discovery rules are liberally construed in recognition of the principle that "justice is more likely to be achieved when there has been full disclosure and all parties are conversant with all available facts." In re Liquidation of Integrity Ins. Co., 165 N.J. 75, 82, 754 A.2d 1177 (2000). Although discovery includes the obtaining of any information, not otherwise privileged, that appears reasonably calculated to lead to the discovery of admissible evidence, R. 4:10-2(a), we have recognized that "the scope of discovery is not infinite." K.S. v. ABC Prof'l Corp., 330 N.J.Super. 288, 291, 749 A.2d 425 (App.Div.2000). Rather, it must be limited to information that is relevant to the subject matter at hand. Ibid. Relevant evidence is "evidence having a tendency in reason to prove or disprove any fact of consequence to the determination of the action." N.J.R.E. 401. The focus should be on "`the logical connection between the proffered evidence and a fact in issue[.]'" Integrity, supra, 165 N.J. at 82, 754 A.2d 1177 (alteration in original) (quoting State v. Hutchins, 241 N.J.Super. 353, 358, 575 A.2d 35 (App.Div.1990)).
A court may enter an order "that justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense[.]" *1138 R. 4:10-3. The court may order that the discovery be had only on specified terms and conditions, that it be had by a method other than the one demanded by the party seeking discovery, that certain matters not be inquired into, or that the scope of the discovery be limited to certain matters. R. 4:10-3(b), (c), and (d). A lower court's discovery rulings should not be reversed on appeal absent an abuse of discretion or a mistaken understanding of the applicable law. Payton v. N.J. Tpk. Auth., 148 N.J. 524, 559, 691 A.2d 321 (1997).
In the context of a defendant's request for police personnel records in a criminal prosecution, where a defendant's constitutional right of confrontation is at stake, it has been held that an in camera inspection of the records should be conducted "where a defendant advances some factual predicate making it reasonably likely that information in the file could affect the officer's credibility." State v. Harris, 316 N.J.Super. 384, 387, 720 A.2d 425 (App.Div.1998). The defendant must establish that the file may reveal prior bad acts that bear "peculiar relevance" to the issues at trial. Id. at 398, 720 A.2d 425. This preliminary requirement recognizes the "significant public interest in maintaining the confidentiality of police personnel records." State v. Kaszubinski, 177 N.J.Super. 136, 138, 425 A.2d 711 (Law Div.1980).
In asserting that he was entitled to personally review the personnel file and IA file of each individual defendant-officer, plaintiff contends that such files were relevant to the issue of the Township's liability under section 1983. It is true that, with respect to municipal liability, "it is logical to assume that continued official tolerance of repeated misconduct facilitates similar unlawful actions in the future." Bielevicz v. Dubinon, 915 F.2d 845, 851 (3d Cir. 1990). Thus, the existence of deficient procedures for discovering officer misconduct may prevent a police chief from learning of an officer's past violent behavior and hence his dangerous propensities. Ibid. (citing Brandon v. Holt, 469 U.S. 464, 467, 105 S.Ct. 873, 875, 83 L.Ed.2d 878, 882 (1985)). This, in turn, could create the causal nexus between the city's unlawful policy and the plaintiff's injuries. Ibid.
Here, however, the court undertook an in camera review of all of the files and documents requested by plaintiff. The court concluded that nothing in the materials reviewed was relevant to plaintiff's claims against the Township because no officer had been accused of anything akin to a false arrest or a violation of a plaintiff's civil rights. In addition, the court found nothing in any officer's psychological file that would have supported a claim that any officer was unfit for duty or that the municipality failed to act in response to such unfitness.
Although plaintiff asserts on appeal that even a demeanor complaint against an officer might be relevant to whether he conducted a careless or slipshod investigation, we do not agree. We also note that this case was not about any officer acting violently towards plaintiff or abusing the authority of his office. Rather, the Township's liability was premised on its apparent failure to have adequately trained its staff with respect to showup procedures. No individual defendant was alleged to have mishandled or mistreated plaintiff in any fashion. As such, and because the lower court did review in camera all of the documents requested by plaintiff, we find no abuse of discretion.
Affirmed.
NOTES
[1] Officer Koster's name is misspelled as "Koester" in the notice of appeal.
[2] Officer Dilginis's name is misspelled as "Dilgines" in the notice of appeal.
[3] Detective Ronan was not listed as an individual defendant on the notice of appeal, nor is he listed as a respondent on the cover of plaintiff's brief, but he is one of the defendant police officers in whose favor the lower court granted summary judgment. In the interest of finality, we treat Detective Ronan as a respondent for the purposes of this appeal.
[4] Captain Shapiro, one of the individual defendants in the proceeding below, was not listed as a defendant on the notice of appeal. All the briefs submitted in pursuit of this appeal list him as a defendant, however, including a brief submitted on his behalf. In the interest of finality, we treat Captain Shapiro as a respondent for the purposes of this appeal.
[5] We are using first initials to distinguish the two officers/defendants whose last names are Donnelly.
[6] As of May 2007, the actual robber had not been apprehended, and the investigation was still open.
[7] It was represented to the court that all other defendants had "settled out," but the orders of dismissal are not in the record.
[8] We need not consider the implications, if any, that might pertain here arising from the Special Master's recently-issued report to the Supreme Court in Henderson, as it would be premature to do so pending the Court's review of that report. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543401/ | 997 A.2d 741 (2010)
2010 ME 52
Mark JOHNSTON,
v.
MAINE ENERGY RECOVERY COMPANY, LIMITED PARTNERSHIP.
Docket: Yor-09-311.
Supreme Judicial Court of Maine.
Submitted on Briefs: November 23, 2009.
Decided: June 10, 2010.
*743 Eric Cote, Esq., Saco, ME, for Mark Johnston.
David E. Barry, Esq., Catherine R. Connors, Esq., Marcel A. Quinn, Esq., Pierce Atwood LLP, Portland, ME, for Maine Energy Recovery Company, Limited Partnership.
Panel: SAUFLEY, C.J., and ALEXANDER, LEVY, SILVER, MEAD, and JABAR, JJ.
SILVER, J.
[¶ 1] Mark Johnston appeals from a judgment of the Superior Court (York County, Fritzsche, J.) granting the motion of Maine Energy Recovery Company, Limited Partnership (Maine Energy Recovery) to dismiss Johnston's second amended complaint with prejudice. Johnston's complaint alleged a statutory claim for a private nuisance based on odor. The court held that the complaint failed to state a claim upon which relief can be granted pursuant to M.R. Civ. P. 12(b)(6) because the statutory sections relied upon do not create a cause of action for a private odor nuisance. Because we conclude that 17 M.R.S. § 2701 (2009) provides the statutory basis for an award of damages when the elements of a private nuisance are proved pursuant to either common law or a specific statutory provision, we vacate the judgment. We do not reach the question of whether 17 M.R.S. § 2802 (2009) encompasses a private, as well as a public, nuisance.
I. FACTS AND PROCEDURAL BACKGROUND
[¶ 2] For purposes of evaluating a motion to dismiss, we accept the facts alleged in the complaint as true. Halco v. Davey, 2007 ME 48, ¶ 6, 919 A.2d 626, 629.
[¶ 3] Maine Energy Recovery owns and operates a solid waste incinerator in Biddeford. Mark Johnston, a resident of Saco, lives approximately two-tenths of a mile east of the plant, on the opposite side of the Saco River. The prevailing wind in that area is from the west, so odors and emissions from the incinerator are blown toward Johnston's property.
[¶ 4] The odors reaching Johnston's property from the Maine Energy Recovery incinerator intensified beginning in 1999, and since that time Johnston has had to limit the use of his home because of them. He no longer opens his windows regularly in the summer, and when he does his entire house smells like garbage. He does not use his backyard because of the odor from the plant, and sometimes he experiences headaches and discomfort in his lungs. Johnston asserts that the odors have reduced the value of his property.
[¶ 5] Johnston complained to both Maine Energy Recovery and to the Department of Environmental Protection. Maine Energy Recovery admitted to a problem with odors from the site and has stated publicly that it has taken steps to alleviate the problem, such as installing new scrubbers and increasing the height of the scrubber stacks. These actions have not reduced the odors experienced by Johnston at his home.
[¶ 6] Johnston amended his complaint twice prior to the dismissal of his case. His initial complaint was seven sentences long and requested an injunction, alleging that Maine Energy Recovery's incinerator has emitted offensive smells for many years, and that he had complained about the odor to no avail. Maine Energy Recovery filed a motion for a more definite statement, which was granted, and Johnston responded by amending his complaint.
[¶ 7] The first amended complaint contained the same allegations as the original, but added that Johnston was asserting a common law nuisance action, as well as a statutory cause of action for nuisance pursuant to 17 M.R.S. § 2701, which provides *744 for a private action for damages, and 17 M.R.S. § 2802, which lists "miscellaneous nuisances" including "offensive smells."
[¶ 8] Maine Energy Recovery filed a motion to dismiss, and Johnston responded with his second amended complaint, which he asserted addressed all of the points in Maine Energy Recovery's motion. In his motion to amend the complaint a second time, Johnston stated: "defendant claims that 17 M.R.S.A. section 2802 relates only to a public nuisance. Plaintiff agrees, and has dropped the claim." The motion additionally stated that Johnston was "dropping the common law claim and going with the Maine statutory claim."
[¶ 9] The second amended complaint, which is at issue here, sought damages under section 2701 as well as an injunction under 17 M.R.S. § 2702 (2009). The complaint does not mention section 2802, or any common law claims. Maine Energy Recovery moved to dismiss the complaint for failure to state a claim upon which relief can be granted. See M.R. Civ. P. 12(b)(6). The court granted the motion and dismissed the complaint with prejudice, finding that sections 2701 and 2702 provide remedies for a nuisance but do not in themselves provide a basis for liability, and that a cause of action is also not supplied by section 2802, which lists only public nuisances. Under these facts, the court found that Johnston's complaint did not state a valid nuisance claim. Johnston appeals.
II. DISCUSSION
A. Standard of Review
[¶ 10] The legal sufficiency of a complaint, when challenged by a motion to dismiss, is reviewed de novo. Persson v. Dep't of Human Servs., 2001 ME 124, ¶ 8, 775 A.2d 363, 365. We "examine the complaint in the light most favorable to the plaintiff to determine whether it sets forth elements of a cause of action or alleges facts that would entitle the plaintiff to relief pursuant to some legal theory." Halco, 2007 ME 48, ¶ 6, 919 A.2d at 629 (quotation marks omitted).
B. Legal Analysis
[¶ 11] Johnston contends that, contrary to the holding of the Superior Court, his complaint sufficiently states a statutory nuisance claim under 17 M.R.S. § 2701. We conclude that section 2701 provides a statutory cause of action for damages when either the common law elements or statutory elements of nuisance are met. Because Johnston's complaint meets the requirements of notice pleading for a common law cause of action, we vacate the judgment.
1. Statutory Claim
[¶ 12] Title 17 M.R.S. § 2701 provides that "[a]ny person injured in his comfort, property or the enjoyment of his estate by a common and public or a private nuisance may maintain against the offender a civil action for his damages, unless otherwise specially provided." The statute also provides for injunctive relief when a nuisance is proved. Id. § 2702.
[¶ 13] Although we have stated in one case that recovery under section 2701 is limited to the nuisances listed elsewhere in title 17, chapter 91, see Charlton v. Town of Oxford, 2001 ME 104, ¶ 25, 774 A.2d 366, 374-75, the facts of that case distinguish it from the nuisance at issue here. In Charlton, the plaintiffs alleged a nuisance under 30-A M.R.S. § 4302 (2009). 2001 ME 104, ¶ 9, 774 A.2d at 370. That provision, in a chapter titled "Municipalities and Counties," states that a "violation of a municipal land use ordinance or regulation is a nuisance." 30 M.R.S. § 4302. Enforcement of violations is limited, however, by another section in that chapter, which states that only municipalities may *745 bring actions arising under land use regulations, 30-A M.R.S. § 4452(4) (2009), and provides for fees and injunctive relief, id. § 4452(3). Therefore, in Charlton, we dealt with an explicit statutory limitation on the enforcement mechanism to respond to that particular nuisance. Allowing a private action through section 2701 would be inconsistent with that limitation. See Charlton, 2001 ME 104, ¶ 19, 774 A.2d at 373 ("[S]ection 4452 gives a municipality, and only a municipality, the authority to enforce land use regulations. Accordingly, only municipalities may bring an action for violations of such regulations.").
[¶ 14] Here, in contrast, there is no statutory provision limiting the remedy for an odor nuisance, so we apply the language of section 2701. See State v. Christen, 2009 ME 78, ¶ 12, 976 A.2d 980, 984 ("[W]hen interpreting a statute, [we] look first to the plain meaning of the statutory language to give effect to legislative intent." (quotation marks omitted)). In order to prevail on a nuisance claim under section 2701, Johnston must prove (1) that he was "injured in his comfort, property, or the enjoyment of his estate," (2) "by a common and public or a private nuisance." 17 M.R.S. § 2701. Section 2701 does not, by its plain language, limit recovery to the nuisances listed elsewhere in the chapter. Therefore, Johnston could meet the private nuisance element of section 2701 by showing either that the activity meets the general definition established at common law, or that it is specifically made a private nuisance by section 2802. An earlier version of the statute reflected this clearly, stating:
Any person, injured in his comfort, property, or the enjoyment of his estate, by any nuisance, as before described, or at common law ... may maintain, against the party guilty thereof, an action on the case for the recovery of the damages, which he has thereby sustained, unless it be otherwise specially provided by law.
R.S. ch. 164, § 8 (1841) (emphasis added); see also Norcross v. Thoms, 51 Me. 503, 505 (1863) (discussing 1857 version of statute and stating that "[o]ur statute does not define a nuisance, but simply provides a remedy for certain injuries arising from a nuisance at common law").
[¶ 15] Because Johnston waived his argument that the activity at issue here is specifically made a private nuisance by section 2802, see Blue Star Corp. v. CKF Props., LLC, 2009 ME 101, ¶ 26, 980 A.2d 1270, 1277 ("If a party in knowing possession of a right acts inconsistently with the right or that party's intention to rely on it, the right is deemed waived."), to prevail on his claim he must show that the activity meets the common law definition of a private nuisance. A private nuisance "consists in a use of one's own property in such a manner as to cause injury to the property, or other right, or interest of another." Norcross, 51 Me. at 504. We further explained the elements required to prove a private nuisance in Charlton, 2001 ME 104, ¶ 36, 774 A.2d at 377. These elements are: (1) "[t]he defendant acted with the intent of interfering with the use and enjoyment of the land by those entitled to that use," with intent meaning only that "the defendant has created or continued the condition causing the interference with full knowledge that the harm to the plaintiff's interests are occurring or are substantially certain to follow"; (2) there was some interference of the kind intended; (3) the interference was substantial such that it caused a reduction in the value of the land; and (4) the interference "was of such a nature, duration or amount as to constitute unreasonable interference with the use and enjoyment of the land." Id. ¶¶ 36 & 37 n. 11, 774 A.2d at 377-78 (quotation marks omitted).
*746 [¶ 16] Johnston's complaint sufficiently pleads his claim for damages pursuant to section 2701 and the common law.[1] Maine is a notice pleading state, and only "requires `a short and plain statement of the claim' to provide fair notice of the cause of action." Town of Stonington v. Galilean Gospel Temple, 1999 ME 2, ¶ 14, 722 A.2d 1269, 1272 (quoting M.R. Civ. P. 8(a)(1)). Notice pleading requires only "language that describes the essence of a private nuisance complaint"; a complaint need not identify the particular legal theories that will be relied upon. Id. ¶ 15 & n. 3, 722 A.2d at 1273; see also Foss v. Me. Tpk. Auth., 309 A.2d 339, 342 (Me.1973) ("[O]ur task in dealing with a case such as that now before us is not to test the sufficiency of the labels employed ... but to determine, based upon the factual allegations, whether or not an interest of plaintiffs has been impaired or injured in such a way as to justify the granting of legal relief."). The complaint meets this requirement.
[¶ 17] Further, Johnston's claim is not barred by the fact that Maine Energy Recovery's activity was licensed. We have never held that any activity conducted pursuant to a license is necessarily immune from private actions. To the contrary, the licensing status of an activity does not affect the determination of whether it is a private nuisance. See Burbank v. Bethel Steam Mill Co., 75 Me. 373, 382-83 (1883) (holding that even where a statute classifies an unlicensed steam engine as a "common nuisance," a private plaintiff must still prove nuisance-in-fact to recover, because "[t]he want of a license in no way caused or contributed to" the injury). Any specifically authorized activity must be conducted "in the manner contemplated by the legislative authorization," see Foss, 309 A.2d at 343, and both the licensing requirements and Department of Environmental Protection regulations show that Maine Energy Recovery is prohibited from creating nuisance odors, see 38 M.R.S. § 1310-N(1)(A) (2009); 5 C.M.R. 06 096 400-14 § 4(G)(1)(b) (2001); see also Burbank, 75 Me. at 384 (finding that while defendants were authorized to operate a steam mill, "their charter [does not] authorize them to... use it in such a manner that it will be a nuisance to others in the enjoyment of their property"); Norcross, 51 Me. at 504 ("A lawful as well as unlawful business may be carried on so as to prove a nuisance.").
2. Primary Jurisdiction
[¶ 18] Finally, Maine Energy Recovery argues that the doctrine of primary jurisdiction provides an alternate ground for dismissal. That doctrine holds that "courts should avoid ruling, on appeal, on matters committed by law to the decision-making authority of an administrative agency before the administrative agency has first had an opportunity to review and decide the facts on the merits of the matter at issue." Christian Fellowship & Renewal Ctr. v. Town of Limington, 2006 ME 44, ¶ 40, 896 A.2d 287, 298. "As a matter of judicial policy," agencies are given primary jurisdiction, based on their expertise. See State v. R.D. Realty Corp., 349 A.2d 201, 207 (Me.1975).
[¶ 19] The doctrine of primary jurisdiction is not applicable here. Despite statutory requirements and Department of Environmental Protection regulations regarding odors emitted by licensed facilities, see 38 M.R.S. § 1310-N(1)(A); 3 C.M.R. 06 096 400-19 § 4(G)(1)(b), Maine *747 Energy Recovery presents no evidence that such regulation was intended to displace private nuisance actions. This is not a matter clearly committed by statute to agency decision-making. Cf. R.D. Realty, 349 A.2d at 205 (applying the doctrine because it is "clear that the statutory scheme envisions that ordinarily the [agency] will make the determination that a development is or is not exempt from regulation by the [agency]"). Additionally, Maine Energy Recovery has not shown that resolving nuisance odors is an area of Department of Environmental Protection expertise. Under these facts, we decline to apply the doctrine of primary jurisdiction.
[¶ 20] Johnston's complaint sufficiently states a claim for common law nuisance and damages pursuant to 17 M.R.S. § 2701, and the doctrine of primary jurisdiction does not apply. Therefore the dismissal constituted error.
The entry is:
Judgment vacated. Remanded to Superior Court for further proceedings consistent with this opinion.
NOTES
[1] Although Johnston appears to have waived his common law cause of action, that does not preclude his claim because he pleaded 17 M.R.S. § 2701 (2009), which we now clarify provides a cause of action for damages for a common law nuisance, and we conclude that the pleading incorporated the common law elements of nuisance. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543429/ | 55 B.R. 172 (1985)
In re Clarence Amos BROWN, Debtor.
VTCC, INC., d/b/a Volvo White Truck Credit Company, Plaintiff,
v.
Clarence Amos BROWN and Thomas J. Carlson, Trustee, Defendants.
Bankruptcy No. 84-04018-S.
United States Bankruptcy Court, W.D. Missouri, S.D.
November 14, 1985.
Roland N. Balzer, James B. Lowe, Kansas City, Mo., for VTCC, Inc.
Thomas J. Carlson, Springfield, Mo., Trustee.
MEMORANDUM OPINION AND ORDER
JOEL PELOFSKY, Bankruptcy Judge.
Debtor purchased a White truck tractor from Liberal Truck Service. The retain sales contract was assigned to VTCC, Inc., hereinafter Volvo. Debtor defaulted on the obligation and Volvo repossessed the truck. Debtor then filed for relief on December 28, 1984.
Volvo seeks modification of the automatic stay to permit it to sell its collateral. The trustee asserts that Volvo is not a secured creditor because it did not place its lien on a Missouri title. The parties have agreed that there are no disputes of material fact and that the question may be resolved on the pleadings.
At the time of purchase debtor lived in Marshall, Missouri. The truck, however, was licensed in Oklahoma and a title issued by that state, reflecting the lien held by Volvo. According to his schedules, debtor operated a trucking company from his home. This truck was used in that business. Although there is no evidence on the point, it is likely that Volvo and debtor knew the truck would be kept in Missouri but driven over the road outside Missouri.
Liens on motor vehicles must be perfected in accordance with the provisions of Chapter 301, R.S.Mo.1969. "The method provided in sections 301.600 to 301.670 of perfecting and giving notice of liens or encumbrances subject to sections 301.600 to 301.670 is exclusive". Section 301.650(2) Uniform Commercial Code filing requirements are not applicable to the perfection of liens on motor vehicles. In re Jackson, 268 F. Supp. 434 (DC ED Mo.1967) Farmers & Merchants Bank v. Borg-Warner Acceptance Corp., 665 S.W.2d 636 (Mo.App. 1983).
Section 301.600, R.S.Mo.1969, provides
1. Unless excepted by section 301.650, a lien or encumbrance on a motor vehicle or trailer, as defined by section 301.010, is not valid against subsequent transferees or lienholders of the motor vehicle or trailer who took without knowledge of *173 the lien or encumbrance unless the lien or encumbrance is perfected as provided in sections 301.600 to 301.670.
2. A lien or encumbrance on a motor vehicle or trailer is perfected by the delivery to the director of revenue of the existing certificate of ownership, if any, an application for a certificate of ownership containing the name and address of the lienholder and the date of his security agreement, and the required certificate of ownership fee. It is perfected as of the time of its creation if the delivery of the aforesaid to the director of revenue is completed within thirty days thereafter, otherwise as of the time of the delivery.
3. If a motor vehicle or trailer is subject to a lien or encumbrance when brought into this state, the validity and effect of the lien or encumbrance is determined by the law of the jurisdiction where the motor vehicle or trailer was when the lien or encumbrance attached, subject to the following:
(1) If the parties understood at the time the lien or encumbrance attached that the motor vehicle or trailer would be kept in this state and it was brought into this state within thirty days thereafter for the purposes other than transportation through this state, the validity and effect of the lien or encumbrance in this state is determined by the law of this state;
(2) If the lien or encumbrance was perfected under the law of the jurisdiction where the motor vehicle or trailer was when the lien or encumbrance attached, the following rules apply:
(a) If the name of the lienholder is shown on an existing certificate of title or ownership issued by that jurisdiction, his lien or encumbrance continues perfected in this state;
(b) If the name of the lienholder is now shown on an existing certificate of title or ownership issued by that jurisdiction, the lien or encumbrance continues perfected in this state three months after a first certificate of ownership of the motor vehicle or trailer is issued in this state, and also thereafter if, within the three month period, it is perfected in this state;
(3) If the lien or encumbrance was not perfected under the law of the jurisdiction where the motor vehicle or trailer was when the lien or encumbrance attached, it may be perfected in this state; in that case perfection dates from the time of perfection in this state;
(4) A lien or encumbrance may be perfected under paragraph (b) of subdivision (2) or subdivision (3) of this subsection either as provided in subsection 2 or by the lienholder delivering to the director of revenue a notice of lien or encumbrance in the form the director of revenue prescribes and the required fee.
The primary purposes of the legislation are to create a simple system of lien perfection with adequate notice to the public and to produce revenue. In re Jackson, supra. But it is the perfection and notice provisions which are of significance to the bankruptcy court. Perfection can occur even though the taxes and fees are not paid. Ford Motor Credit Co. v. Pedersen, 575 S.W.2d 916 (Mo.App.1978). Both Ford Motor Credit Co., supra, and In re Jackson, supra, stand for the proposition that the payment of taxes associated with the purchase of a motor vehicle is immaterial to the validity of the lien. See In re Jackson, 268 F.Supp. at 440-441.
The parties agree that Volvo was perfected as a matter of Oklahoma law. They also agree that no attempt was made to license the vehicle or obtain title showing Volvo's lien in Missouri. Under those circumstances various portions of Section 301.600 apply.
Although the statutory progression seems to suggest a different result depending on whether or not the vehicle was to be brought into Missouri although titled in another state, a careful reading shows that not to be so. Where the lien was perfected in the state of purchase and "[i]f the name of the lienholder is shown on an existing *174 certificate of title ... issued by that jurisdiction, his lien ... continues perfected in this state ..." Section 301.600-3(2)(a).
It is appropriate to read Section 301.600 from the general to the specific. The statute begins by declaring the broad rule that a lien is invalid if not perfected. The statute goes on to provide for a method of perfection and then targets the situation where a vehicle is purchased and titled in another state and then brought into Missouri. The language is a bit ambiguous, suggesting first that perfection can be had only by delivering an application to the director of revenue, but then saying in less equivocal language that if it is perfected in the state of purchase or location, it is also perfected in Missouri.
What Section 301.600 focuses on is the notice aspect of titling with the lien reflected on the title. The revenue aspect of registration is not considered. The statute says that if a lien is perfected in another state it is also perfected in Missouri but, where the vehicle is intended to be kept in Missouri, perfection will be determined by Missouri law. The issue of validity does not depend, although the argument can be made fairly, on filing with the Missouri director of revenue but rather whether the title, wherever issued, contains sufficient information to meet perfection standards in the State of Missouri. To conclude otherwise would make Section 301.600-3(2)(a) meaningless. See In re Howell, 28 B.R. 273 (Bkrtcy Me.1983). The Court finds that Volvo's perfection in Oklahoma by having its identity on the title would cause it to be perfected in Missouri. Obviously if Volvo is perfected in the circumstance where the purchaser intended to keep the vehicle in Missouri, then it is also perfected under the less stringent circumstance of Section 301.600-3.
The Court holds that Volvo holds a perfected security interest in the White truck Western Star, Model 4964, Serial Number 909496 and is entitled to prevail over the claim of the trustee. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543396/ | 997 A.2d 453 (2010)
296 Conn. 579
Angelo A. ZIOTAS
v.
The REARDON LAW FIRM, P.C.
No. 18292.
Supreme Court of Connecticut.
Argued February 17, 2010.
Decided June 8, 2010.
Michael C. Harrington, with whom was William F. Gallagher, New Haven, for the appellant (defendant).
Anthony M. Fitzgerald, with whom was David S. Hardy, New Haven, for the appellee (plaintiff).
ROGERS, C.J., and PALMER, VERTEFEUILLE, ZARELLA and McLACHLAN, Js.[*]
*454 ROGERS, C.J.
The issue raised by this appeal is whether a year-end bonus, the amount of which is discretionary, constitutes wages under General Statutes § 31-71a(3).[1] The plaintiff, Angelo A. Ziotas, brought this action against the defendant, The Reardon Law Firm, P.C., alleging that the defendant had breached an agreement to pay him a year-end bonus and seeking statutory damages under General Statutes § 31-72.[2] The trial court, Corradino, J., granted the defendant's motion to strike the plaintiff's claim under § 31-72. After the plaintiff filed an amended complaint containing an amended claim pursuant to § 31-72, the trial court granted the defendant's request to revise the amended complaint by deleting the claim. After a trial on the contract claim, the court, Eveleigh, J., rendered judgment for the plaintiff, from which the defendant appealed and the plaintiff cross appealed to the Appellate Court. The Appellate Court then reversed the ruling of the trial court only as to the granting of the defendant's request to delete the claim pursuant to § 31-72. See Ziotas v. Reardon Law Firm, P.C., 111 Conn.App. 287, 314-15, 959 A.2d 1013 (2008). We granted the defendant's petition for certification to appeal, limited to the following issue: "Did the Appellate Court improperly conclude that the Connecticut wage statute ... § 31-71a, applied to the plaintiff's year-end bonus?" Ziotas v. Reardon Law Firm, P.C., 290 Conn. 903, 962 A.2d 796 (2009). We now answer that question in the affirmative and, therefore, reverse in part the judgment of the Appellate Court. See footnote 5 of this opinion.
The Appellate Court's opinion sets forth the following facts and procedural history. "The defendant is a professional corporation in New London that is engaged in the practice of law. The defendant's practice is concentrated in the representation of plaintiffs in personal injury cases on a contingent fee basis. Robert I. Reardon is an attorney at law and the president of the defendant law firm, exercising all of the powers customarily exercised by a chairman, president and chief executive officer of a corporation.
"The plaintiff has been a member of the Connecticut bar since December 5, 1991, and began working for the defendant as an associate on April 1, 1992. On February 10, 1993, the plaintiff and Reardon, on behalf of the defendant, executed a written contract setting forth the rights and responsibilities of the parties with respect to the plaintiff's employment. Reardon, on behalf of the defendant, drafted the contract and informed the plaintiff that his continued employment was contingent on his agreeing to its terms. Reardon afforded the plaintiff no opportunity to edit the terms of the contract.
"Pursuant to the terms of the contract, the plaintiff was an employee at will of the defendant, subject to termination, with or without cause, at any time. Paragraph three of the contract further provided: Annual compensation shall be subject to review by the Board of Directors of [the defendant] on the anniversary of employment of [t]he Associate. Compensation *455 shall be based, in part, on the following criteria:
"a. Seniority in The Firm,
"b. Business generation,
"c. Business productivity,
"d. Quality of work/professional ability,
"e. Work profitability,
"f. Participation in professional activities and pro bono work,
"g. Noteworthy outside activities,
"h. Loyalty and commitment to [the defendant].
"The plaintiff's initial base salary was $35,000 per year, and, after his first nine months of employment, he received a bonus of $12,000. From 1993 through 1997, the amount of the plaintiff's base salary and bonuses increased annually. In 1997, the plaintiff received total compensation in the amount of $117,600, which included a base salary of $62,600 and a bonus of $55,000. Reardon alone determined the amounts of the plaintiff's base salary and bonuses from year to year. Bonuses were paid only in December but were not calculated on the basis of any particular percentage of the defendant's income.
"The plaintiff left the defendant's employ on October 15, 1998, after receiving a total of $55,926.56 in base salary for that year. The plaintiff did not receive a bonus in December, 1998.
"The plaintiff commenced the present action in May, 1999, seeking damages for the defendant's failure to pay him a bonus in 1998. On June 9, 2000, the plaintiff filed a second amended complaint against the defendant, alleging that the defendant's failure to pay him a bonus in 1998 constituted a breach of the parties' employment contract. In count two, the plaintiff alleged that the defendant wrongfully had withheld wages in violation of ... § 31-72 by virtue of its failure to pay the bonus."[3] (Internal quotation marks omitted.) Ziotas v. Reardon Law Firm, P.C., supra, 111 Conn.App. at 290-92, 959 A.2d 1013.
"On October 23, 2000, the court, Corradino, J., granted the defendant's motion to strike the plaintiff's second count. In its memorandum of decision, the court acknowledged that under certain circumstances, a bonus may be considered wages under § 31-71a(3). The court emphasized that such circumstances may exist when a bonus is based on individual production; see Cook v. Alexander & Alexander of Connecticut, Inc., 40 Conn.Supp. 246, 488 A.2d 1295 (1985); when a connection [existed] between the additional work performed and the promise of a bonus; Wuerth v. Schott Electronics, Inc., Superior Court, judicial district of Ansonia-Milford, Docket No. CV-91-036406-S, 1992 WL 65351 (March 13, 1992) (7 C.S.C.R. 456); and when the bonus was promised if [the plaintiff] accomplished certain objectives of the employer. See Pelton v. Olin Corp., Superior Court, judicial district of Stamford-Norwalk, Docket No. CV-88-0092063-S, 1991 WL 149540 (July 30, 1991) (6 C.S.C.R. 771). The court determined, however, that the bonus in the present case was not a wage, as defined by § 31-71a. The court reasoned that the allegations described the bonus as a reflection of the success of the firm and a percentage of the defendant's net income. The court then concluded that the bonus, as alleged in the second count of the second amended complaint, was an arbitrary figure determined by the success or lack of success of all members of the firm, with no relation to any actual services performed by the plaintiff.
*456 "The plaintiff thereafter repleaded the second count in his third amended complaint filed November 22, 2000. The defendant filed a request to revise the plaintiff's third amended complaint, to which the plaintiff objected. On January 24, 2001, the court overruled the plaintiff's objection and deleted the second count of the plaintiff's third amended complaint.[4] The court held that that count suffered from the same defect as the second count in the second amended complaint in that it [did] not describe a bonus that accrued as a result of the plaintiff's personal efforts alone .... The plaintiff subsequently filed a fourth amended complaint that reflected the court's order deleting the second count; see Practice Book § 10-37(b) ...." (Emphasis in original; internal quotation marks omitted.) Ziotas v. Reardon Law Firm, P.C., supra, 111 Conn.App. at 306-308, 959 A.2d 1013.
"The parties tried the plaintiff's sole remaining count, breach of contract, to the court, Eveleigh, J. By memorandum of decision filed November 7, 2006, the court rendered judgment in favor of the plaintiff and awarded damages in the amount of $50,000 plus offer of judgment interest in the amount of $44,860.27. The defendant appealed, and the plaintiff cross appealed." Id., at 292-93, 959 A.2d 1013.
In his cross appeal to the Appellate Court, the plaintiff claimed that the trial court, Corradino, J., improperly had overruled his objection to the defendant's request to revise the second count of his third amended complaint.[5] Id., at 304-305, 959 A.2d 1013. Specifically, he claimed that the trial court improperly had concluded that "the bonus portion of his compensation, as alleged in his complaint, did not fall within the definition of wages, as that term is used in ... § 31-71a(3)." Id., at 305, 959 A.2d 1013. The Appellate Court concluded that, under this court's decision in Mytych v. May Dept. Stores Co., 260 Conn. 152, 159, 793 A.2d 1068 (2002), the plaintiff's bonus would constitute a wage if "the terms of the parties' employment agreement, as alleged in the complaint, vested in the plaintiff a right to compensation in the form of a bonus in exchange for the services that he had provided during the first ten months of 1998." Ziotas v. Reardon Law Firm, P.C., supra, 111 Conn.App. at 313, 959 A.2d 1013. Because the plaintiff had alleged in this third amended complaint that the employment contract had "provided for a bonus `that fairly reflects his contribution to the [defendant's success]'"; id., at 312-13, 959 A.2d 1013; and that he had "contributed to the defendant's success by providing legal services to the defendant's clients and by generating fees"; id., at 313, 959 A.2d 1013; the Appellate Court concluded that "the bonus could have been classified as wages for purposes of § 31-71a(3)." Id., at 313-14, 959 A.2d 1013. Accordingly, the Appellate Court concluded that the trial court, Corradino, J., improperly had overruled the plaintiff's objection to the defendant's request to delete the claim from the third amended complaint. Id., at 314, 959 A.2d 1013. This appeal followed.
*457 On appeal, the defendant claims that the Appellate Court improperly determined that the bonus that was payable to the plaintiff constituted wages as defined by § 31-71a(3). Specifically, the defendant contends that, when the amount of a bonus is discretionary and is not ascertainable by applying a formula, the bonus does not constitute wages under the statute. We agree.
At the outset, we set forth our standard of review. Whether a bonus constitutes wages under § 31-71a(3) is a question of statutory construction, over which we exercise plenary review. See Weems v. Citigroup, Inc., 289 Conn. 769, 778, 961 A.2d 349 (2008). "When construing a statute, [o]ur fundamental objective is to ascertain and give effect to the apparent intent of the legislature.... In other words, we seek to determine, in a reasoned manner, the meaning of the statutory language as applied to the facts of [the] case, including the question of whether the language actually does apply.... In seeking to determine that meaning, General Statutes § 1-2z directs us first to consider the text of the statute itself and its relationship to other statutes. If, after examining such text and considering such relationship, the meaning of such text is plain and unambiguous and does not yield absurd or unworkable results, extratextual evidence of the meaning of the statute shall not be considered .... The test to determine ambiguity is whether the statute, when read in context, is susceptible to more than one reasonable interpretation." (Internal quotation marks omitted.) Id., at 779, 961 A.2d 349.
Section 31-71a(3) defines "`[w]ages'" as "compensation for labor or services rendered by an employee, whether the amount is determined on a time, task, piece, commission or other basis of calculation...." In determining whether the plaintiff's annual bonus is included in this definition of wages, we do not write on a blank slate. In Weems v. Citigroup, Inc., supra, 289 Conn. at 778-79, 961 A.2d 349, this court considered whether bonuses that were discretionary and based on the performance and profitability of the employer's business came within the statute.[6] We determined that the language of § 31-71a(3) "is ambiguous because it is subject to two different reasonable readings: A bonus, even if discretionary or not specifically tied to identifiable extra work performed by an employee, could be considered `compensation for labor or services rendered' by that employee; General Statutes § 31-71a(3); it similarly is reasonable to read that language as linked expressly to identifiable extra work or services performed by a particular employee. Accordingly, § 1-2z permits us to consult extratextual sources in making this determination." Weems v. Citigroup, Inc., supra, at 779, 961 A.2d 349.
After determining in Weems that the legislative history of § 31-71a(3), offered no guidance on the question of whether a bonus constitutes wages, this court turned to the decisions of other courts and agreed with their conclusions that "bonuses that are awarded solely on a discretionary basis, and are not linked solely to the ascertainable efforts of the particular employee, are not wages under § 31-71a(3)." Id., at 782, 961 A.2d 349. In the present case, the defendant relies on this language to support its claim that, even though the plaintiff was contractually entitled to a bonus, because the amount of the plaintiff's *458 bonus was discretionary, it did not constitute wages. The plaintiff counters that this court's decision in Weems bars claims under § 31-72 only when the bonus itself was discretionary, not when the bonus was contractually required and only the amount was discretionary. We agree with the defendant.
Although the plaintiff is correct that neither Weems nor the cases that we cited in that decision address the situation in which the payment of a bonus was contractually required and only the amount of the bonus was discretionary,[7] we conclude for the following reasons that such a bonus does not constitute wages under § 31-71a(3). First, our reasoning in Weems also applies when an employee is contractually entitled to a bonus, but the amount is indeterminate and discretionary. We stated in that case that "the wording of the statute, in expressly linking earnings to an employee's labor or services personally rendered, contemplates a more direct relationship between an employee's own performance and the compensation to which that employee is entitled. Discretionary additional remuneration, as a share in a reward to all employees for the success of the employer's entrepreneurship, falls outside the protection of the statute." (Internal quotation marks omitted.) Weems v. Citigroup, Inc., supra, 289 Conn. at 780-81, 961 A.2d 349. Although an employee may have a justified expectation of additional compensation when the employer is contractually obligated to give a bonus to the employee and any contractual conditions, such as the employer's annual profitability, are met, the relationship between performance and compensation is still attenuated if the amount of the bonus is discretionary and dependent on factors other than the employee's performance.
Second, a review of other statutes reveals that, when the legislature intends for a statutory scheme to apply broadly to all forms of remuneration, it knows how to make that intention clear. See General Statutes § 5-196(7);[8] General Statutes § 7-452(5);[9] General Statutes § 31-222(b)(1);[10] General Statutes § 45a-34(8);[11]*459 General Statutes § 52-350a(5);[12] General Statutes § 52-362(a)(3).[13]
Third, although § 31-72 is remedial,[14] a violation of the statute gives rise to substantial criminal and civil penalties. Under § 31-72, an employee is entitled to "twice the full amount of such wages, with costs and such reasonable attorney's fees as may be allowed by the court" when an employer fails to pay the employee's wages. Under General Statutes § 31-71g,[15] the employer may be fined up to $5000 or imprisoned up to five years, or both, for violating § 31-72. An interpretation of the term "`[w]ages'" as defined by § 31-71a(3) that would allow the imposition of these penalties when the amount of a bonus is indeterminate and discretionary would raise serious questions of fundamental fairness and due process.[16] "It is well established that this court has a duty to construe statutes, whenever possible, to avoid constitutional infirmities...." (Internal quotation marks omitted.) State v. Cook, 287 Conn. 237, 245, 947 A.2d 307, cert. denied, ___ U.S. ___, 129 S. Ct. 464, 172 L. Ed. 2d 328 (2008); see also George M. v. Commissioner of Correction, 290 Conn. 653, 668 n. 5, 966 A.2d 179 (2009) (rule of lenity provides that ambiguous penal statute must be strictly construed against state).
In support of his argument to the contrary, the plaintiff contends that the fact *460 that the amount of the bonus was indefinite does not render the contract unenforceable. See Ziotas v. Reardon Law Firm, P.C., supra, 111 Conn.App. at 302, 959 A.2d 1013 ("[u]nder the modern law of contract, if the parties so intend, they may reach a binding agreement even if some of the terms of that agreement are still indefinite" [internal quotation marks omitted]). We recognize that a contract may be enforceable even though some of its terms are indefinite. Indeed, the contractual agreement regarding the plaintiff's bonus was enforced in the present case. See footnote 5 of this opinion. For the foregoing reasons, however, we do not agree that all contractually based compensation, including a contractual bonus the amount of which is discretionary, constitutes wages under § 31-71a(3).
The plaintiff also relies on this court's statement in Mytych v. May Dept. Stores Co., supra, 260 Conn. at 161, 793 A.2d 1068, that "[t]he purpose of the [wage protection] statutes ... is to protect the sanctity of the wages earned by an employee pursuant to the agreement she or he has made with her or his employer. The statutes do not dictate the means by which those wages are calculated." In Mytych, however, the specific amount of the wages owed by the employer to the employees was ascertainable by application of a set formula to which the employees had agreed when they were hired. Id., at 155-56, 793 A.2d 1068. We merely held in that case that, when an employee has agreed to a specific formula for the calculation of his or her wages, the part of the formula that allows deductions does not constitute a deduction from earned wages. Id., at 164-65, 798 A.2d 1068. Thus, that case does not control the present case, in which the amount of the plaintiff's bonus was not ascertainable by the application of a set formula.
Finally, the plaintiff relies on § 31-222-3 of the Regulations of Connecticut State Agencies, which provides in relevant part: "The term `wages' means all remuneration for employment, whether paid in money or something other than money. The name by which such remuneration is designated is immaterial. Thus, salaries, commissions on sales or on insurance premiums, fees and bonuses are wages within the meaning of the act if payable by an employer to his employees as compensation for services not excepted by the law...." This regulation, however, implements the provisions of the Unemployment Compensation Act, General Statutes § 31-222 et seq., not the wage protection statutes. Because the definition of wages for purposes of the Unemployment Compensation Act is broader than the definition set forth in § 31-71a(3); see footnote 10 of this opinion; the regulation provides no guidance to our construction of § 31-71a(3).
For the foregoing reasons, we reverse the judgment of the Appellate Court holding that the trial court, Corradino, J., improperly had overruled the plaintiff's objection to the defendant's request to revise count two of his third amended complaint seeking statutory damages under § 31-72.
The judgment of the Appellate Court is reversed only as to its reversal of Judge Corradino's decision overruling the plaintiff's objection to the defendant's request to revise count two of his third amended complaint and the case is remanded to the Appellate Court with direction to affirm the judgment of the trial court; the judgment of the Appellate Court is affirmed in all other respects.
In this opinion the other justices concurred.
NOTES
[*] The listing of justices reflects their seniority status on this court as of the date of oral argument.
[1] General Statutes § 31-71a(3) provides in relevant part: "`Wages' means compensation for labor or services rendered by an employee, whether the amount is determined on a time, task, piece, commission or other basis of calculation...."
[2] General Statutes § 31-72 provides in relevant part: "When any employer fails to pay an employee wages in accordance with the provisions of sections 31-71a to 31-71i, inclusive, or fails to compensate an employee in accordance with section 31-76k ... such employee or labor organization may recover, in a civil action, twice the full amount of such wages, with costs and such reasonable attorney's fees as may be allowed by the court...."
[3] "The plaintiff's third count asserted a claim to the 1998 bonus under a theory of promissory estoppel. On August 14, 2006, the plaintiff withdrew this count." Ziotas v. Reardon Law Firm, P.C., supra, 111 Conn.App. at 292 n. 1, 959 A.2d 1013.
[4] See P & L Properties, Inc. v. Schnip Development Corp., 35 Conn.App. 46, 50, 643 A.2d 1302 (when amended complaint merely restates original cause of action that was previously stricken, defendant may use request to revise to delete allegations), cert. denied, 231 Conn. 913, 648 A.2d 155 (1994).
[5] In its appeal to the Appellate Court, the defendant raised multiple challenges to the judgment of the trial court, Eveleigh, J., in favor of the plaintiff on his breach of contract claim. The Appellate Court rejected those challenges and affirmed the judgment in favor of the plaintiff on that claim. Ziotas v. Reardon Law Firm, P.C., supra, 111 Conn.App. at 293-304, 959 A.2d 1013. On appeal, the defendant does not challenge the judgment of the Appellate Court on the plaintiff's contract claim.
[6] Our decision in Weems was released after the Appellate Court released its decision in the present case.
[7] In Weems, we characterized the bonuses at issue as "discretionary bonuses." Weems v. Citigroup, Inc., supra, 289 Conn. at 774, 961 A.2d 349; see also id., at 782, 961 A.2d 349 (bonuses were "awarded solely on a discretionary basis"); see also Whiting-Turner Contracting Co. v. Fitzpatrick, 366 Md. 295, 306, 783 A.2d 667 (2001) (bonus that is not promised in compensation package but is purely discretionary does not constitute wages); Truelove v. Northeast Capital & Advisory, Inc., 95 N.Y.2d 220, 224, 738 N.E.2d 770, 715 N.Y.S.2d 366 (2000) (plaintiff had no contractual right to bonus and his "share in the bonus pool was entirely discretionary and subject to the non-reviewable determination of his employer"); cf. Murphy v. First Union Capital Markets Corp., 152 N.C.App. 205, 208-209, 567 S.E.2d 189 (2002) (bonus paid in form of restricted stock was wage, despite fact that it had not vested, because state statute specifically defined "wages" as including "bonuses").
[8] General Statutes § 5-196(7) provides: "`Compensation' means the salary, wages, benefits and other forms of valuable consideration earned by and provided to an employee in remuneration for services rendered."
[9] General Statutes § 7-452(5) provides in relevant part: "`Wages' means all remuneration for employment, including the cash value of all remuneration paid in any medium other than cash, except that the term shall not include that part of such remuneration which, even if it were paid for employment within the meaning of the federal Insurance Contributions Act, would not constitute wages within the meaning of that act...."
[10] General Statutes § 31-222(b)(1) provides: "`Total wages' means all remuneration for employment and dismissal payments, including the cash value of all remuneration paid in any medium other than cash except the cash value of any remuneration paid for agricultural labor or domestic service in any medium other than cash."
[11] General Statutes § 45a-34(8) provides in relevant part: "`Pay' means the salary, wages or earnings of an employee, but does not include any fees or allowances for expenses...."
[12] General Statutes § 52-350a(5) provides: "`Earnings' means any debt accruing by reason of personal services, including any compensation payable by an employer to an employee for such personal services, whether denominated as wages, salary, commission, bonus or otherwise."
[13] General Statutes § 52-362(a)(3) provides in relevant part: "`Earnings' means any debt accruing to an obligor by reason of such obligor's personal services, including any compensation payable by an employer to an employee for such personal services whether denominated as wages, salary, commission, bonus or otherwise, including unemployment compensation if a purchase of service agreement between the Commissioner of Social Services and the Labor Commissioner is in effect pursuant to subsection (e) of section 17b-179...."
[14] See Tianti v. William Raveis Real Estate, Inc., 231 Conn. 690, 696, 651 A.2d 1286 (1995) ("[t]he purpose of § 31-72 is remedial, and therefore it must be given a liberal construction in favor of those whom the legislature intended to benefit").
[15] General Statutes § 31-71g provides: "Any employer or any officer or agent of an employer or any other person authorized by an employer to pay wages who violates any provision of this part may be: (1) Fined not less than two thousand nor more than five thousand dollars or imprisoned not more than five years or both for each offense if the total amount of all unpaid wages owed to an employee is more than two thousand dollars; (2) fined not less than one thousand nor more than two thousand dollars or imprisoned not more than one year or both for each offense if the total amount of all unpaid wages owed to an employee is more than one thousand dollars but not more than two thousand dollars; (3) fined not less than five hundred nor more than one thousand dollars or imprisoned not more than six months or both for each offense if the total amount of all unpaid wages owed to an employee is more than five hundred but not more than one thousand dollars; or (4) fined not less than two hundred nor more than five hundred dollars or imprisoned not more than three months or both for each offense if the total amount of all unpaid wages owed to an employee is five hundred dollars or less."
[16] By way of example, if an employer paid a bonus but the employee subjectively believed that he was entitled to more money, it seems highly unlikely that the legislature would have intended that an employer would be subject to large fines and possible imprisonment under those circumstances. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543466/ | 997 A.2d 1177 (2010)
COM.
v.
SHIFFER.
No. 93 MAL (2010).
Supreme Court of Pennsylvania.
June 29, 2010.
Disposition of Petition for Allowance of Appeal Denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543450/ | 105 F.2d 478 (1939)
In re POINTER BREWING CO.
VERBEST
v.
MICHAEL YUNDT CO.
No. 11404.
Circuit Court of Appeals, Eighth Circuit.
July 19, 1939.
*479 E. C. Halbach, of Clinton, Iowa (Frank W. Ellis, of Clinton, Iowa, on the brief), for appellant.
Herman E. Friedrich, of Milwaukee, Wis. (Malcolm K. Whyte, of Milwaukee, Wis., and Morris B. Mitchell, of Minneapolis, Minn., on the brief), for appellee.
Before GARDNER and WOODROUGH, Circuit Judges, and BELL, District Judge.
GARDNER, Circuit Judge.
This is an appeal by the trustee in a reorganization proceeding under Section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207, from an order of the bankruptcy court allowing appellee's claim as a secured one. The facts were stipulated, and hence are not in dispute.
The Pointer Brewing Company, referred to in the record as the debtor, is an Iowa corporation, with its place of business at Clinton, Iowa. On November 4, 1933, it entered into a conditional sale contract with Michael Yundt Company, appellee, for the purchase of certain machinery and equipment for the agreed purchase price of $21,000. The property was delivered to the debtor and continued in its possession. The contract provided that the machinery and equipment should remain the property of the vendor until the contract had been completely performed by the vendee. This contract was not acknowledged in accordance with the laws of Iowa so as to entitle it to be filed for record, though it was in fact recorded in Clinton, Iowa, where the debtor's plant was located. This contract provided for payment by monthly installments. These payments were periodically made to and including the payment for July, 1936, when they were discontinued.
On February 9, 1937, the debtor filed a petition for reorganization under Section 77B of the Bankruptcy Act. At that time there existed a default on the part of the debtor in the payments due on the 11th days of August, September, October, and November, 1936, respectively. Because of these defaults in payment, the vendor, appellee herein, elected to reclaim the property, but the trustee refused to deliver possession. The principal balance then due and unpaid was $3,412.50 and the interest to February 9, 1937, amounting to $237.71. To the petition of reclamation filed by appellee, the trustee filed objections, contending that there was no valid notice of appellee's claim filed for record as required by the laws of Iowa, in that the contract was not acknowledged, and hence, was not entitled to be filed for record.
The cause was submitted to a special master on an agreed statement of facts. The special master made his report, including findings of fact and conclusions of law, denying appellee's lien on the property, but allowing its claim as a general creditor. The lower court sustained exceptions filed by appellee to the report of the special master, and held that the contract was valid as between the parties, and that there was no showing that it was void by reason of an attaching creditor taking the same without notice. The court denied the appellee's right to reclaim the property, but allowed the amount of its claim as a secured claim and so classified it.
The pertinent part of Section 47a of the Bankruptcy Act, Sec. 75(a) 11 U.S.C.A., reads as follows: "(a) Trustees shall respectively * * * (2) collect and reduce to money the property of the estates for which they are trustees, under the direction of the court * * *; and such trustees, as to all property in the custody or coming into the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a creditor holding *480 a lien by legal or equitable proceedings thereon; and also, as to all property not in the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a judgment creditor holding an execution duly returned unsatisfied."
Subparagraph (a), Section 107, 11 U.S. C.A., reads as follows: "(a) Claims which for want of record or for other reasons would not have been valid liens as against the claims of the creditors of the bankrupt shall not be liens against his estate."
As the trustee is vested with "all the rights, remedies, and powers of a creditor holding a lien by legal or equitable proceedings," it is important to determine what the rights of such a creditor are. The Bankruptcy Act does not purport to define nor determine the character or extent of such right. The validity and construction of the conditional sale contract here involved, as affecting the right of the trustee in bankruptcy, must be determined under the law of the State of Iowa. Bryant v. Swofford Bros. Dry Goods Co., 214 U.S. 279, 29 S. Ct. 614, 53 L. Ed. 997; York Mfg. Co. v. Cassell, 201 U.S. 344, 26 S. Ct. 481, 50 L. Ed. 782; Emerson-Brantingham Implement Co. v. Lawson, D.C., 237 F. 877; Sweeney v. Medler, 10 Cir., 78 F.2d 148; In re Penglase Sand & Gravel Co., 7 Cir., 76 F.2d 593; Liquid Carbonic Corp. v. Phillips, 5 Cir., 68 F.2d 515.
Section 10015 of the Iowa Statutes in effect provides that no sale or mortgage of personal property where the vendor or mortgagor retains actual possession shall be valid "against existing creditors or subsequent purchasers without notice," unless a written notice conveying the same is executed, properly acknowledged, and duly recorded or filed in the county where the mortgagor or vendor resides at the time of the execution of the instrument. Section 10016 reads as follows: "No sale, contract, or lease, wherein the transfer of title or ownership of personal property is made to depend upon any condition, shall be valid against any creditor or purchaser of the vendee or lessee in actual possession obtained in pursuance thereof, without notice, unless the same be in writing, executed by the vendor and vendee, or by the lessor and lessee, acknowledged by the vendor or vendee, or by the lessor or lessee, and recorded or filed and such instrument or a true copy thereof be deposited the same as chattel mortgages."
Section 9949 provides: "1. Where there is a contract to sell specific goods * * * the seller may, by the terms * * * reserve the right of possession or property in the goods until certain conditions have been fulfilled."
In F. P. Gluck Co. v. Therme, 154 Iowa 201, 134 N.W. 438, 440, the Supreme Court of Iowa held that an assignee for benefit of creditors was not, within the meaning of the Iowa statute, a purchaser without notice. In the course of the opinion it is there said: "The assignee in insolvency proceedings takes no higher or better right in the subject of the assignment than was held by his insolvent grantor, and, if the plaintiff could have asserted ownership of or lien upon the property as against the drug company, the same title or lien may be asserted against the company's assignee for the benefit of creditors. * * * The assignee is not a purchaser for value, neither does the assignment have the effect of the levy of an attachment of the goods in favor of creditors. * * * As between buyer and seller of personal property, an agreement that the title shall remain in the latter until the purchase price is paid is valid (Bailey v. Harris, 8 Iowa 331, 74 Am.Dec. 312; Moseley v. Shattuck, 43 Iowa 540), and it may be enforced except as against creditors and purchasers without notice." The court held that such an assignee acquired no right to property involved in a conditional sale contract.
In International Harvester Co. v. Poduska, 211 Iowa 892, 232 N.W. 67, 69, 71 A.L.R. 973, the court considered a contest between a vendor under a conditional sale contract and a trustee in bankruptcy. Referring to Section 10016 of the Iowa Code, the court said: "This statute does not declare the sale or contract to be invalid as between the parties. The assignee, Mackovets, stood in the shoes, and only succeeded to the rights, of the assignor, Poduska. It is the repeated pronouncement of this court that the assignee for the benefit of the creditors of the assignor is neither a purchaser nor a creditor within the meaning of the statute. He cannot be deemed a purchaser for value as he paid nothing for the property. The word `creditor,' as used in the statute, means one who has obtained a lien as by attachment, execution, or otherwise upon the property before notice, actual or constructive, of the conditional contract of sale. * * * It is therefore apparent that, in accord with our previous holding, *481 as between the appellee and the assignee, Mackovets, the rights of the assignee are no greater or better than the rights of the assignor, Poduska, at the time of the assignment. Thus, it is seen that the rights of the trustee are in no way aided because of the deed of assignment, as claimed by the appellant. The assignor could not by a deed of assignment convey the appellee's property to his assignee for the benefit of his (the assignor's) general creditors. The deed of assignment operates only on the property of the assignor and not upon the property of the appellee. Since, under our holdings, the assignee is neither a purchaser nor a creditor within the meaning of the law, and succeeds only to the rights of his assignor, as between appellee and the assignee, the question as to whether the contracts were properly acknowledged, and filed, or recorded so as to afford constructive notice thereof, becomes wholly immaterial."
The contract, under the Iowa law, being valid as between the parties, title to the property remained in the vendor, and when the vendee filed its petition for reorganization the property covered by the conditional sale contract was not the property of the debtor, and hence, did not pass to the trustee.
Prior to the decision in International Harvester Co. v. Poduska, supra, the Supreme Court of Iowa had announced the same principle in American Laundry Machinery Co. v. Everybody's Laundry, 185 Iowa 760, 171 N.W. 161, but in that case the conditional sale contract was in fact properly filed for record, and hence this court, in Albert Pick & Co. v. Wilson, 8 Cir., 19 F.2d 18, declined to follow the dictum contained in the American Laundry Machinery Company case. It should be noted too that in the Albert Pick & Company case there was involved a chattel mortgage and not a conditional sale contract. Under such circumstances, the trustee took title to the property because the debtor had title, but where, under the state law, the title of the vendor under a conditional sale contract is recognized as valid, title does not pass to the trustee. In re Lake's Laundry, 2 Cir., 79 F.2d 326, 102 A. L.R. 247; Michael Yundt Co. v. Phillips, 7 Cir., 84 F.2d 388.
The Albert Pick & Company case is therefore distinguishable on its facts from the instant case. Since the decision of this court in that case, the Iowa Supreme Court has adhered to the doctrine announced in American Laundry Machinery Co. v. Everybody's Laundry, supra, by its decision in the International Harvester Company case. It is urged that even in the International Harvester Company case it was not necessary for the court to decide the question here at issue, and there is some basis for this contention. We are here, however, attempting to determine what the law of Iowa is on this question, and these two decisions are clear indications as to the views of that court, and, as said in Hawks v. Hamill, 288 U.S. 52, 53 S. Ct. 240, 242, 77 L. Ed. 610, decided since our decision in Albert Pick & Co. v. Wilson, supra: "A wise comity has decreed that deference shall at times be owing, though there may be lacking, in the circumstances, a strict duty of obedience. * * * To be sure there is room for argument that limiting distinctions will have to be drawn in the future. We must leave it to the courts of Oklahoma to declare what they shall be. * * * At least it is a considered dictum, and not comment merely obiter. It has capacity, though it be less than a decision, to tilt the balanced mind toward submission and agreement."
It is also there said that: "The stranger from afar, unacquainted with the local ways, permits himself to be guided by the best evidence available, the directions or the counsel of those who dwell upon the spot."
See, also, Blue Valley Creamery Co. v. Consolidated Products Co., 8 Cir., 81 F.2d 182.
This last decision of the Supreme Court of Iowa is, we think, sufficient "to tilt the balanced mind toward submission and agreement." We need not consider whether the court should have awarded the appellee the possession of the property because appellee has not appealed from the order allowing its claim as a secured one. We conclude that no rights of the appellant have been prejudiced by the order appealed from and it is therefore affirmed.
BELL, District Judge (dissenting).
The opinion in this case holds that a conditional sale contract, even though not acknowledged and recorded at the time of the bankruptcy of the vendee as required by the statutes of the state, is good as *482 against the trustee in bankruptcy in possession of the property covered by the contract. I cannot subscribe to that principle.
The Court says: "The validity and construction of the conditional sale contract here involved, as affecting the right of the trustee in bankruptcy, must be determined under the law of the State of Iowa." Three decisions of the Supreme Court are cited to show the law of that state. F. P. Gluck Company v. Therme, 154 Iowa 201, 134 N.W. 438; American Laundry Machinery Company v. Everybody's Laundry, 185 Iowa 760, 171 N.W. 161; International Harvester Company v. Poduska, 211 Iowa 892, 232 N.W. 67, 71 A.L.R. 973. These cases clearly are distinguishable from the one under consideration.
The Gluck case involved an assignment for the benefit of creditors under the Iowa Code. It was not a bankruptcy proceeding and no reference was made to the bankruptcy law. Moreover, there was a controversy as to whether the assignee was in possession of the property that was involved and there was a reversal so that there might be a determination of that question.
The American Laundry Machinery Company case was a bankruptcy proceeding and the instrument involved was a conditional sales contract but the Court found that it was duly recorded at the time of bankruptcy; consequently, we again find a wholly different case from the one before us. Because of that distinction this Court in the case of Albert Pick & Company v. Wilson, 8 Cir., 19 F.2d 18, refused to follow the dictum contained in that decision.
In International Harvester Company v. Poduska the plaintiff sold certain property to the defendant under conditional sales contracts in 1926 and 1927. On May 28, 1928, the defendant made an assignment for the benefit of creditors under the Iowa Code. The vendor promptly replevined the property involved and obtained possession of it. On September 24, 1928, the defendant filed a petition in bankruptcy. The bankrupt, or his assignee, at that time did not have possession of the property, had not had it for approximately four months, and the trustee in bankruptcy never acquired possession of it. The property at no time was in possession of the bankruptcy court. This distinction is made entirely clear by the Supreme Court of Iowa and the provisions of the Bankruptcy Act, 11 U.S.C.A. § 1 et seq., were expressly eliminated from consideration in the case. This Court's quotation from that decision clearly shows the position of the Iowa Court as to the character of the title of an assignee under the Code, but it in no way defines the title of a trustee in bankruptcy under the laws of the United States or the State of Iowa in a case where the property is in possession of the bankruptcy court and where the adverse claim is made under an instrument unrecorded at the time of bankruptcy. The Court, following F. P. Gluck Co. v. Therme, American Laundry Machinery Co. v. Everybody's Laundry, and other decisions, held that a deed of assignment conveyed only the property of the assignor, that the assignee under the Code was neither a purchaser nor a creditor and succeeded only to the rights of the assignor; and that, as between the vendor and the assignee, "the question as to whether the contracts were properly acknowledged, and filed, or recorded so as to give constructive notice thereof, becomes wholly immaterial." [211 Iowa 892, 232 N.W. 70, 71 A.L.R. 973.]
The Supreme Court of Iowa has not decided the question before us. This Court is not bound by the dictum of that Court or required to guess from it what may be decided in the future. In the absence of a definite, established rule settled by controlling decisions the way is open to follow the general rules of law.
This case is squarely ruled by the decision of this Court in Albert Pick & Company v. Wilson, supra, which is supported by an overwhelming weight of authority, is right on principle, and there is no substantial reason why it should be reversed. The only utterance of the Iowa Court on the subject, since that case was decided, was in International Harvester Company v. Poduska, supra, wherein the Court disclaimed the applicability of the bankruptcy law and made no pretense at solving our problem.
The fact that a chattel mortgage was involved in the case of Albert Pick & Company and a conditional sales contract is involved in this case is a barren distinction. Sweeney v. Medler, 10 Cir., 78 F.2d 148. This Court in Burroughs Adding Machine Company v. Bogdon, 10 Cir., 9 F.2d 54, held a conditional sales contract void as against the trustee in bankruptcy of the purchaser, where possession was not retained by the seller, and the instrument was not filed for record at the time the bankruptcy proceeding was commenced. It *483 is true that the title to property sold under a conditional sale contract remains in the vendor until the conditions of the contract have been performed, but in this case the rights of creditors without notice intervened. The purpose of the Bankruptcy Act vesting the trustee with rights, remedies, and powers of a creditor holding a lien by legal or equitable proceedings, is for the protection of creditors and where liens are claimed on property in the custody of the bankrupt or his trustee, it is immaterial whether the title to the property is in the mortgagee under a mortgage or in the vendor under a conditional sales contract.
An important bankruptcy question is here presented, and, as affecting the right of the trustee the Bankruptcy Act must be consulted. The Constitution of the United States, Section 8, Article 1, U.S.C.A., confers on Congress the power "to establish * * * uniform Laws on the subject of Bankruptcies throughout the United States." The decisions of the state courts defining property rights do not bind the federal courts in bankruptcy, when contrary to the policy and the proper contruction of the Bankruptcy Act. Board of Trade of City of Chicago, et al. v. Johnson, Trustee, 264 U.S. 1, 44 S. Ct. 232, 68 L. Ed. 533. The federal courts have the power to construe the language of the Bankruptcy Act. If that power is not exercised there may be as many constructions as there are states and there will be no uniformity in the law. In re Landis, 7 Cir., 41 F.2d 700. In the interpretation of a federal act, local law is not controlling unless the federal statute "by express language or necessary implication, makes its own operation dependent upon state law." Heiner, Collector, v. Mellon et al., 304 U.S. 271, 58 S. Ct. 926, 930, 82 L. Ed. 1337. We must accept the interpretation of the state law by the highest judicial tribunal of the state (Supreme Lodge, Knights of Pythias v. Meyer, 265 U.S. 30, 44 S. Ct. 432, 68 L. Ed. 885), just as we must accept its declaration of the principles of the common law (Erie Railroad Company v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188, 114 A.L.R. 1487), but the federal courts are vested with the power to interpret the federal statutes. Albert Pick & Company v. Wilson, supra.
The opinion in this case fails to give effect to the amendment of June 25, 1910, to Section 47a of the Bankruptcy Act, 11 U.S.C.A. § 75(a) which provides: "* * * trustees, as to all property in the custody or coming into the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a creditor holding a lien by legal or equitable proceedings thereon." Prior to this amendment the trustee took only the title of the bankrupt. York Manufacturing Company v. Cassell, 201 U.S. 344, 26 S. Ct. 481, 50 L. Ed. 782, with exceptions not here germane. Subsequent to the amendment the trustee's title, effective at the time of filing the petition in bankruptcy, was not only that of the bankrupt but also that of a creditor holding a judgment lien. Bailey v. Baker Ice Machine Company, 239 U.S. 268, 36 S. Ct. 50, 60 L. Ed. 275. The effect of the amendment is stated in Gilbert's Collier on Bankruptcy, Fourth Edition, Section 1344, as follows: "This amendment reaches that class of cases in which no creditors have acquired a lien by legal or equitable proceedings. It vests in the trustee for the benefit of all the creditors the potential rights of a creditor having such a lien. Thus, equities or rights in favor of such creditors as against a chattel mortgage or other instrument which for want of record or other reason is invalid as to them, may be asserted with the same force and effect by the trustee of the bankrupt debtor." Remington on Bankruptcy, Volume 4, Section 1405, says: "And by the Amendment of 1910 it simply gave to the bankruptcy proceedings the effect of arming the trustee with process, so that the creditors might not be debarred by the bankruptcy from asserting in behalf of all creditors the rights given to creditors by State law dependent on their being `armed with process.'" This Court in Albert Pick & Company v. Wilson, supra, said [19 F.2d 20]:
"The intention of the Bankruptcy Act prior to 1910 was that the trustee should take the estate precisely where he found it, with no additional rights, excepting, of course, the specific right to set aside preferences and liens acquired within the four-month period. York Mfg. Co. v. Cassell, 201 U.S. 344, 26 S. Ct. 481, 50 L. Ed. 782. But, as pointed out in Smith-Flynn Commission Co. [8 Cir., 292 F. 465], supra, and the Congressional Record, 61st Congress, 2d Session, 2275-2277, the amendment under discussion was designed to supersede that decision.
"* * * In other words, the amendment arms the trustee with process to the *484 same extent that any judgment creditor would have according to the law of the particular state, and he is not necessarily concluded by an instrument or agreement which might have been good against the bankrupt had bankruptcy not intervened." Citing authorities.
This should be, and in my opinion is, the general rule: A conditional sales contract is not valid against the vendee's trustee in bankruptcy in possession, unless the contract is recorded as required by local law, and the trustee is armed with the rights of a creditor holding a lien by legal or equitable proceedings. Section 47a of the Bankruptcy Act; Albert Pick & Company v. Wilson, supra; Sweeney v. Medler, supra; Barbee v. Spurrier Lumber Company, 10 Cir., 64 F.2d 5; In re Supreme Furniture Company, D.C., 25 F.2d 488; In re Press Printers & Publishers, 3 Cir., 23 F.2d 34; In re Public Opinion Pub. Co., D.C., 20 F.2d 404; In re Master Knitting Corporation, 2 Cir., 7 F.2d 11; In re Douglas Lumber Company, D.C., 2 F.2d 985; Groner v. Babcock Printing Press Mfg. Co., 4 Cir., 267 F. 822; In re Youngs Cornell Utilities, D.C., 20 F. Supp. 381; Fairbanks Steam Shovel Company v. Wills, 240 U.S. 642, 36 S. Ct. 466, 60 L. Ed. 841; Bailey v. Baker Ice Machine Company, supra. Under this rule there is no interference with the operation of the state law in the interpretation of the instrument involved, the property rights under it and whether it meets the requirements of the recording act. When a petition in bankruptcy is filed and the property involved passes in custodia legis, certain provisions of the Bankruptcy Act become paramount and must have a uniform interpretation for the preservation of the act itself. The provisions here involved should have universal interpretation and should not be invalidated by the construction of the courts, state or national, or by judicial legislation. Certainly, there is no occasion for it in this case for the simple reason that there is no settled rule in Iowa to the contrary.
The conditional sales contract with which we are concerned was valid as between the parties, but when the petition in bankruptcy was filed and the trustee took possession of the property covered by the contract, the rights of creditors without notice were involved and the trustee became vested under Section 47a with "all the rights, remedies, and powers of a creditor holding a lien by legal or equitable proceedings thereon." If a creditor of the vendee, prior to bankruptcy, had reduced his claim to judgment and had found it necessary to levy on this same property to satisfy the judgment, the levy would have been sustained. In other words, appellee's claim would not have been valid against a judgment creditor without actual or constructive knowledge of the conditional sales contract. It was admitted that the contract involved in this case was not acknowledged and recorded so as to give constructive notice.
There was no occasion for a showing by the creditors that they did not have actual knowledge. The burden of proof was on the party claiming under the unrecorded instrument. Albert Pick & Company v. Wilson, supra; Martin Bros. & Co. v. Lesan, 129 Iowa 573, 105 N.W. 996. The statutory requirements for recording were mandatory. Lee County Sav. Bank v. Snodgrass Bros., 182 Iowa 1387, 166 N.W. 680, 681.
The opinion of the Court in this case follows the law of Iowa applicable to assignments under the state code and the bankruptcy law prior to the amendment of 1910 and not the bankruptcy law as it now exists. It is subversive of the amendment and will restore the very defect the amendment was designed to remedy. It is not conducive to uniformity and will open the door to fraud. Consequently, I am forced to the conclusion that there should be a reversal. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543937/ | 55 B.R. 475 (1985)
In the Matter of LINDO'S TOURS, USA, INC., Debtor(s).
Bankruptcy No. 82-2237.
United States Bankruptcy Court, M.D. Florida, Tampa Division.
November 6, 1985.
*476 Harley E. Riedel, Tampa, Fla., for debtor.
Shirley Arcuri, Tampa, Fla., for movant.
Jeffrey Warren, Tampa, Fla., for creditors committee.
Robert B. Glenn, Jr., Tampa, Fla., for Ford Motor Credit Co.
ORDER ON APPLICATION FOR ALLOWANCE OF ADMINISTRATIVE EXPENSE
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a Chapter 11 case and the matter under consideration is an Application for Allowance of Administrative Expense to be accorded a first priority status pursuant to § 507(a)(1) of the Bankruptcy Code. The Application is filed by Alpha Business Consultants, Inc. (Alpha) who claims to be entitled to a sales commission in the amount of $37,500.00, allegedly earned in conjunction with the sale of certain assets of Lindo's Tours, USA, Inc. (Lindo), the Debtor involved in the above-captioned Chapter 11 case.
The Application is opposed not only by Lindo but also by the Official Creditor's Committee and also by Ford Motor Credit Company, a secured creditor of the Debtor. The challenge of the right of Alpha to receive any allowance is based on the following contentions:
First, it is contended that Alpha has no standing to seek an allowance because only the Debtor has standing to seek authority to employ professionals and to pay commission to a business broker such as Alpha. Secondly, no allowance can be made to a professional employed by a debtor-in-possession unless the employment was authorized by the Court and since the employment of Alpha was never authorized by this Court, none can be paid. In addition, it is the contention of the parties opposing the Application that Alpha was not the procuring agent of the sale of the properties of Lindo and even if it was, the commission sought is grossly excessive.
The evidence presented at the final evidentiary hearing reveals the following:
At the time relevant to the matter under consideration, Lindo was already involved as a debtor-in-possession in a Chapter 11 case. As a debtor-in-possession, Lindo was authorized to continue to operate its business, one facet of which was the operation of chartered bus tours in the State of Florida. Although the Chapter 11 case had been pending since October 25, 1982 and the Plan of Reorganization filed by Lindo had been scheduled for confirmation several times, Lindo had not been able to proceed to confirmation simply because it did not have the funds needed for confirmation. *477 By the summer of 1984, it became evident that unless Lindo was able to achieve confirmation in the near future, it would face either a dismissal or conversion of the case to a Chapter 7 and would be liquidated.
At this point, the president of Lindo commenced to explore the possibility of selling the bus division of Lindo. Although there is evidence in this record that Lindo contacted one Mr. Slaughter who, at that time was an officer of Gulf Coast Gray Lines, a corporation also engaged in the bus tour business, a business owned or at least controlled by Mr. Henry; nothing really developed from this contact. As a result, Mr. Lindo contacted Alpha and ultimately entered into an agreement with Alpha entitled "Client Agreement" (Exhibit # 1). The Agreement, executed by Mr. Lindo on behalf of the Debtor, granted Alpha the exclusive right to sell the bus division of the Debtor, including all buses, equipment, and goodwill for $100,000 cash plus an assumption of all liabilities of Lindo. The Agreement provided for a sales commission to be paid to Alpha of 25% of the cash proceeds of the sale upon closing. The Agreement also provided that any sale was contingent upon approval by the bankruptcy court (Exhibit 1, paragraph 14).
There is no dispute that the Debtor never applied for authority to engage the services of Alpha. It is without doubt that Alpha did immediately undertake an aggressive campaign in order to obtain a purchaser for the assets to be sold by the Debtor, albeit without success. Alpha contacted through the mail and also telephonically all major corporations engaged in the bus tour businessparticularly those who appeared to be likely prospects. It is without dispute, however, that Mr. Lindo expressly instructed Cletis Belsom, the representative of Alpha, not to contact Mr. Henry, the principal of Gulf Coast Gray Lines, because his corporation was the major competitor of Lindo in the State of Florida and Mr. Lindo did not want it to be known to the competition that its major asset was for sale.
Be that as it may, it appeared at one point in time that Mr. Henry appeared on the horizon as the only lively prospect for the purchase. Whether this came about as a result of the efforts of Alpha or independent of any involvement of Alpha is really without any significance in light of the undisputed fact that from that point on the representative of Alpha was intimately involved in the negotiation with Mr. Henry, the negotiations which ultimately culminated in the sale on which Alpha claims to have earned the $37,500.00 commission it seeks by its Application under consideration.
It is clear and it is conceded by Alpha that the sale which was ultimately concluded and approved by this Court is a sale on terms totally different than the terms originally outlined in the Agreement entered into between Alpha and the Debtor. The sale, as originally contemplated, called for the sale of buses, equipment, and assumption of all liabilities of the Debtor for a purchase price of $1,000,000 plus. It called for only a $100,000 down payment and a commission of 25% which would have consumed all the cash proceeds of the sale. The sale, as ultimately consummated, does not include buses or equipment nor an assumption of liabilities. It calls for $150,000 cash on closing and a possible additional $100,000 more, dependent on the purchaser's ability to increase its business in the next year by 2½% over and above the present year's growth which is very unlikely to occur at this time.
This is the basic factual background to which one must apply the legal principles in order to resolve the matter under consideration which is Alpha's entitlement to the sales commission to be charged as an administrative claim accorded first priority pursuant to § 507(c) of the Bankruptcy Code.
It should be noted at the outset that it is basic to administration of estates under the Bankruptcy Code that trustees or Debtors-in-Possession do not have the authority to employ professionals pursuant to § 327 of the Bankruptcy Code without prior *478 court approval. The corollary to this is equally evident, which is, that as a general proposition no one can be awarded compensation for services rendered to the estate if the employment was not authorized. Of course, these general principles, just like others, are not without exception. Thus, there is respectable authority to support the proposition that the bankruptcy court may, in its discretion, award compensation to an attorney even though the Debtor never applied for authority to employ counsel. In the Matter of Triangle Chemicals, Inc., 697 F.2d 1280 (5th Cir.1983). See also Stolkin v. Nachman, 472 F.2d 222 (7th Cir.1973). These cases permitted consideration of applications for allowance by professionals who were not authorized to be retained in spite of the clear language of Bankruptcy Rule 2016 which provides that allowance for professionals can only be approved on application of the trustee.
Thus, it is clear that the bankruptcy court has power to consider an application for allowance for services even though it was not filed by the trustee or by the Debtor, but by the professional himself or herself. This conclusion, however, is not the end but only the beginning of the inquiry and only leads to the really relevant point which must be considered in order to answer the ultimate question which is Alpha's entitlement to the commission it seeks.
It is well established and it is without serious dispute that before a professional can be awarded an allowance out of the funds of the estate, the employment must be authorized as a general rule prior to the commencement of the performance of the services. While nunc pro tunc approvals should be the exception, it may be proper upon a showing, first, that the application would have been approved had the same been presented prior to the employment of the professional and, second, the failure to file a timely application was due to excusable neglect and the fault of the trustee or the debtor-in-possession and not the professional. In re American Cooler Co., Inc., 125 F.2d 496 (2d Cir.1942); In re Avorn Dress Co., Inc., 79 F.2d 337 (2d Cir.1935); In the Matter of Alafia Land Dev. Corp., 40 B.R. 1 (Bankr.M.D.Fla.1984) (unauthorized borrowing by a debtor-in-possession).
Considering these requirements in reverse, this Court is satisfied, based on this record, that the services rendered by Alpha were beneficial; that they were performed and, contrary to the contention of the objecting parties, these services were instrumental in the ultimate consummation of the sale. This is so even though the terms of the sale were substantially different from the terms of the sale originally contemplated and which was the basis of the Agreement. There is nothing unusual that the terms of the ultimate sale change during the negotiation and the terms of the ultimate sale are radically different from the terms of the initial offer submitted to the selling agent by the seller of the property.
This leaves for consideration the first item, that is, the authorization of employment nunc pro tunc of Alpha which is, of course, an indispensable condition for allowance. This brings into consideration the question of whether the application to employ Alpha would have been approved had the Debtor filed the application prior to Alpha performing the services for which it seeks an allowance.
Considering the entire background of this Chapter 11 case, this Court is satisfied that this should be answered in the affirmative but not on the terms outlined in the Agreement. At the time the Debtor enjoyed the services of Alpha, Lindo was at the end of its quest to obtain confirmation of its Plan of Reorganization. It had no funds to meet its confirmation needs and had no other prospects to obtain the funds needed except through the sale of its business. This conclusion does not mean, however, that this Court would have approved a 25% commission. On the contrary, it is clear that under no circumstances would this Court have approved anything higher than a 10% commission based on the cash price, in light of the provisions of the Plan *479 of Reorganization. Alpha, in order to justify a 25% commission, put into evidence documents showing the time spent by Alpha while attempting to effectuate a sale. First, the legal competency of this documentation is questionable since it was prepared for this litigation and the documents do not represent contemporaneous recordation of time when the service in question was actually performed. Secondly, in determining the reasonable sales commission, the time spent is not of any significance and the reasonableness of the commission is generally measured by the usual rate charged in the industry in transactions similar to the transaction involved in the present instance.
Unfortunately, no such evidence has been presented in the present instance. Be that as it may, this Court would not have authorized a 25% commission, let alone 25% based not only on the actual cash payment but also on the potential additional consideration which is a deferred payment based on the performance of the bus division, a payment highly problematical, as noted earlier.
Based on the foregoing, this Court is satisfied that the objections to the allowance sought by Alpha should be overruled and its Application for Allowance should be granted but only in a reduced amount. Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the objections to the allowance sought by Alpha be, and the same hereby are, overruled. It is further
ORDERED, ADJUDGED AND DECREED that the Application for Allowance be, and the same hereby is, granted in the amount of $15,000 and the Debtor shall pay the same within 10 days from the date of the entry of this order. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919523/ | 660 So. 2d 803 (1995)
Tara UNION, Appellant,
v.
STATE of Florida, Appellee.
No. 94-01474.
District Court of Appeal of Florida, Second District.
September 22, 1995.
Ellis Rexwood Curry IV, Tampa, for appellant.
Robert A. Butterworth, Attorney General, Tallahassee, and Kimberly D. Nolen, Assistant Attorney General, Tampa, for appellee.
PER CURIAM.
The defendant, Tara Union, appeals the denial of her motion to suppress cocaine found in her purse during the search of a car in which she was a passenger. We reverse because the state failed to prove that the warrantless search of the car was justified as either a search incident to arrest or a search based on probable cause.
The following undisputed facts were presented by stipulation. Union was a passenger in a car also occupied by two men who were involved in a drug transaction that had *804 been arranged by law enforcement officers using a confidential informant. The officers had no reason to believe that Union would be involved in the drug transaction. Union stayed in the car while the two men went into a hotel room and sold cocaine to the informant. After the men were arrested, two officers who had observed the men arriving at the hotel went to search the car which the men had occupied. When the officers observed Union in the car, they took her out of the car and searched her purse where they found a trace amount of cocaine.
The state contends that the search of the car and its contents was proper as either a search incident to the arrest of the two men who made the drug sale or as a search based on the "automobile exception" established by the United States Supreme Court in Carroll v. United States, 267 U.S. 132, 45 S. Ct. 280, 69 L. Ed. 543 (1925).[1] On the facts presented, neither of these exceptions to the warrant requirement apply.
We first address the "search-incident-to-arrest" argument. In Chimel v. California, 395 U.S. 752, 89 S. Ct. 2034, 23 L. Ed. 2d 685 (1969), the United States Supreme Court held that a lawful arrest justifies the contemporaneous search without a warrant of the person arrested and of the immediately surrounding area. In New York v. Belton, 453 U.S. 454, 460, 101 S. Ct. 2860, 2864, 69 L. Ed. 2d 768 (1981), this exemption from the warrant requirement was extended to automobiles by the Court's holding that "when a policeman has made a lawful custodial arrest of the occupant of an automobile, he may, as a contemporaneous incident of that arrest, search the passenger compartment of that automobile," including any containers found therein. However, unless the arrestee is a recent occupant of the automobile, the Belton rule does not apply. See State v. Vanderhorst, 419 So. 2d 762 (Fla. 1st DCA 1982).
The determination of whether an arrestee was a recent occupant must be made on a case by case basis and should be guided by the rationale underlying the search-incident-to-arrest exception. Therefore, we examine the facts in this case while keeping in mind the fact that Chimel permits an arresting officer to conduct a warrantless search "of the arrestee's person and the area within his immediate control" because of the need to remove any weapons that the arrestee might seek to use and the need to prevent the concealment or destruction of evidence. 395 U.S. at 763, 89 S.Ct. at 2040.
At the time the car was searched, the occupants who were arrested were in a second floor hotel room some distance away from the car and had been away from the car for a long enough time to complete a drug sale and be arrested. While we do not know the exact amount of the distance or time they were away from the car, we do not need these measurements to conclude that the car was not within the area of their immediate control. Thus, the search of the car was too remote in both place and time to be justified as a search-incident-to-arrest. See also Patrick v. State, 603 So. 2d 640 (Fla. 2d DCA 1992) (arrest of defendant for urinating in street behind car did not justify warrantless search of car's interior in absence of evidence that defendant was recent occupant of car at time of arrest); State v. Howard, 538 So. 2d 1279 (Fla. 5th DCA 1989) (where arrestee had exited and locked car before he was approached by officer and then arrested, court held search of car was not incident to arrest).
The state also argues that the officers had probable cause to believe that the car contained contraband because they knew that the co-defendants were arriving at the motel for a controlled drug transaction and witnessed their arrival in the vehicle. The state further argues that the mobility of the car justified the warrantless search. It is true that the police may make a warrantless search of a vehicle if there is probable cause *805 to believe it contains evidence of a crime and it is likely that, due to exigent circumstances, the vehicle will be unavailable by the time a warrant is obtained. See Carroll, 267 U.S. 132, 45 S.Ct. at 280. However, we do not believe that the officers had probable cause to search the vehicle. There were no facts presented to support a belief that there would be additional drugs in the car, and we decline to adopt a presumption that anyone who drives to a location to make a drug sale leaves additional drugs in the vehicle. Because we conclude there was no probable cause to believe that the car contained contraband, we need not address whether there were exigent circumstances to justify a warrantless search.
Accordingly, the motion to suppress should have been granted. The case is reversed and remanded with instructions to discharge the defendant.
PARKER, A.C.J., and BLUE and FULMER, JJ., concur.
NOTES
[1] If the search of the car was proper under either exception, then the search of Union's purse was also proper. See State v. Moore, 619 So. 2d 376 (Fla. 2d DCA 1993) (after arrest of car's driver, police had the right to search passenger's purse found on front floorboard); United States v. Ross, 456 U.S. 798, 102 S. Ct. 2157, 72 L. Ed. 2d 572 (1982) (the scope of the search under the Carroll exception includes every part of the automobile and its contents in which contraband or other evidence of a crime might be expected to be found.) | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919545/ | 91 B.R. 69 (1988)
In re Archie B. FRY, Debtor.
Bankruptcy No. 85-01200-BKC-J13.
United States Bankruptcy Court, E.D. Missouri, E.D.
September 30, 1988.
Peggy T. Hardge-Harris, St. Louis, Mo., for debtor.
Eileen Voss, St. Louis, Mo., trustee.
Frederick J. Dana, Asst. U.S. Atty., St. Louis, Mo., for the U.S.
MEMORANDUM OPINION AND ORDER
JAMES J. BARTA, Chief Judge.
This matter is before this Court on remand from the United States District Court for a determination pursuant to 26 U.S.C. § 6672[1] whether the Debtor acted willfully in failing to collect and pay certain taxes.
This Court previously determined that Archie B. Fry was a "responsible person" under that statute. This conclusion has been affirmed by the District Court. The sole issue before the Court is whether Archie B. Fry willfully failed to collect, account for or pay over the taxes here. This determination on remand is made upon consideration of the record as a whole.
A brief recitation of the facts essential to the determination here is in order.
*70 In early 1980, Karl Kuntzmann owned and operated a tool cutting and grinding business, Precision Edge, Inc. In September, 1982, he decided to work for another company. He left the management of Precision Edge, Inc. in the hands of Archie Fry. Fry had been an employee for a few years at the shop. During October through December, 1982, Fry had full responsibility for the management of the business. He would write the checks for the amount due particular creditors and take these checks to Kuntzmann's residence for signature. Kuntzmann signed all the checks presented and seldom appeared at his shop or took an active role in the business. In early January, 1983, Kuntzmann had a power of attorney drafted which allowed Fry to sign the checks for the business. Thereafter, Kuntzmann was not involved in the business and Fry operated the shop and made his own business decisions. Fry decided when the bills would be paid, wrote the checks, hired and fired employees, moved the business to a new location, negotiated for new business, paid back-taxes due the Internal Revenue Service, and acted as the responsible person for the business.
On or about June 6, 1983, Kuntzmann received a call from Fry informing him that he was abandoning the books and records of Precision Edge, Inc. At that time, Fry was aware that there were no employees left at Precision Edge, Inc. and that Precision Edge, Inc. was no longer operating as a business.
Fry later filed a voluntary petition for relief under the Bankruptcy Code. The Internal Revenue Service filed certain claims in Fry's Chapter 13 Bankruptcy Case. The Debtor objected to the claims on several grounds. At issue here is solely the Debtor's objection to the claim regarding FICA taxes owed for the second quarter of 1983 for Precision Edge, Inc. Under Section 6672 of the Internal Revenue Code, a one hundred percent penalty may be assessed against certain persons referred to generally as the "responsible party".
The burden is on the assessed party to prove his failure to pay over the tax was not willfull. Anderson v. United States, 561 F.2d 162, 165 (8th Cir.1977).
The Eighth Circuit has concluded that it is sufficient if the failure to pay trust funds to the Government was the result of conscious acts or omissions by a responsible person with knowledge of the existence of the taxpayer's obligation to make such payment. Anderson, supra at p. 166.
The willfullness standard has been analyzed by many courts. It has been said that the responsible person "acts willfully if he proceeds with a reckless disregard of a known or obvious risk that trust funds may not be remitted to the government." Brown v. United States, 591 F.2d 1136, 1140 (5th Cir.1979).
Although Fry was not "in possession" of the books and records on June 30, 1983, he could still be determined to have willfully failed to make the payments. In Slodov v. United States, 436 U.S. 238, 247, 98 S. Ct. 1778, 1785, 56 L. Ed. 2d 251, 261-262 (1978), the Supreme Court specifically stated a person need not be responsible for the payment of withholding taxes at the end of the quarter to be a responsible person for that quarter.
In Brown v. United States, supra, the responsible party had been removed from his duties prior to the time the withholding taxes became payable. He was determined to be one of the responsible parties under Section 6672 who had willfully acted because he failed to make required withholding deposits, which was itself willfull. Brown v. United States, supra at 1141. The failure to make deposits of trust funds as required by treasury regulations, and the use of those funds in the interim to pay other bills led the 5th Circuit in Brown to conclude the Section 6672 penalty applied. There is no evidence in the case now before this Court that deposits were required to be made before each quarter.
Here, the Debtor acted recklessly in this case by abandoning the business, knowing it was no longer operational and failing to make payments on the taxes as due. The record amply supports the conclusion that Fry had written a number of checks which remained outstanding when he abandoned *71 the business. The total amount of these outstanding checks exceeded the balance in the business general accounts at that time. Kuntzmann stopped payment on various of these checks.
There was evidence of the collection of accounts receivable after Fry's abandonment. There was no evidence that these were received before June 30, 1983 or whether Fry reasonably expected there to be any funds available to pay the taxes involved here. Even if Fry did expect these sums to be collected, he acted recklessly and willfully in failing to pay over the monies due as he was the responsible person.
The conclusion which must be drawn is that Fry acted in disregard of an obvious risk that the taxes would not be paid over. Further, as the responsible party, his writing payroll checks (for himself and his partner in a new grinding business) was a willing act done to deplete the general account of Precision Edge, Inc. of funds that had been withheld during the quarter and should have been paid over to the government. This reckless conduct is not nullified by the subsequent stop payment orders issued by Kuntzmann.
The record supports the Government's position that Fry knew of his obligation and failed to meet that obligation, and that he willfully failed to collect and pay these taxes. He must now be accountable for his acts and omissions. Therefore,
IT IS ORDERED that the claim No. 8 of the Internal Revenue Service on behalf of the United States Government assessing a one hundred (100%) percent penalty against the Debtor here, Archie B. Fry, for withholding taxes from the second quarter of 1983 and pursuant to 26 U.S.C. § 6672 be and hereby is allowed in the amount of $1,694.31 and to the extent that the Debtor's objection addressed this portion of the claim, it is overruled; and that the allowed amount of this claim is subject to any previous order of this Court regarding sums claimed due the IRS for other time periods.
NOTES
[1] 11 U.S.C. § 6672 reads in pertinent part:
"§ 6672. Failure to collect and pay over tax, or attempt to evade or defeat tax.
(a) General rule. Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over. No penalty shall be imposed under section 6653 for any offense to which this section is applicable." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543491/ | 997 A.2d 230 (2010)
202 N.J. 345
McVEY
v.
BURRELL.
Supreme Court of New Jersey.
June 17, 2010.
Petition for Certification Denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543607/ | 105 F.2d 357 (1939)
In re PHILADELPHIA & READING COAL & IRON CO. Appeal of SCHRAGER.
No. 7129.
Circuit Court of Appeals, Third Circuit.
June 30, 1939.
Archibald Palmer, New York City, and Jenkins, Bennett & Libby, of Philadelphia, Pa., for appellant.
Henry Alan Johnston, of New York City for stockholders of debtor.
Arthur Littleton, of Philadelphia, Pa., (Morgan, Lewis & Bockius, of Philadelphia, Pa., of counsel), for debtor.
Allen Hunter White, of Philadelphia, Pa., for Philadelphia debenture holders' committee.
Chester T. Lane, Gen. Counsel, Securities and Exchange Commission, and Martin Riger, both of Washington, D. C., Morton E. Yohalem, of New York City, and Leon S. Alschuler, of Washington, D. C., (J. Anthony Panuch, of New York City, of counsel), for Securities and Exchange Commission.
Before BIGGS, MARIS, and CLARK, Circuit Judges.
MARIS, Circuit Judge.
In the reorganization proceeding of the Philadelphia and Reading Coal and Iron Company instituted in the court below under Sec. 77B of the Bankruptcy Act, 11 U.S.C.A. § 207, a reorganization plan which accords recognition to existing stockholders has been proposed by creditors and referred by the court to a special master for hearing and report. Thereafter a creditor filed a petition praying (1) that the debtor in possession of its property be directed to proceed against the Philadelphia and Reading Coal and Iron Corporation to recover a debt of $297,591.32 and (2) that the court proceed to determine the solvency or insolvency of the debtor. On May 15, 1939 the court below denied both prayers of the petition. Lawrence Schrager, a creditor, has appealed.
Considering the second question first we note that the court's action was based upon the view expressed in its opinion that "The question of the solvency or insolvency of the Debtor Company cannot be determined until after the adoption or rejection of a plan of reorganization because the plan may change the debt structure of the Debtor Company." In denying the petition upon this ground the court committed a clear error of law since it is the status of the debtor before reorganization which is significant and not its condition thereafter. A plan of reorganization of an insolvent debtor may not over the objection of a single creditor be approved as fair and equitable if it diverts to the stockholders any of the assets which by reason of the insolvency of the debtor belong solely to the creditors. In re 620 Church Street Building Corporation, 299 *358 U.S. 24, 57 S.Ct. 88, 81 L.Ed. 16; In re Barclay Park Corporation, 2 Cir., 90 F. 2d 595; In re Day & Meyer, Murray & Young, 2 Cir., 93 F.2d 657; Price v. Spokane Silver & Lead Co., 8 Cir., 97 F.2d 237; Sophian v. Congress Realty Co., 8 Cir., 98 F.2d 499. Consequently it is necessary that the court determine the solvency or insolvency of the debtor before the plan of reorganization is approved. Only in the light of that determination can the court ascertain whether the stockholders may properly be permitted to participate in the reorganization.
Returning to the first question raised in the court below we learn from the record that the Philadelphia and Reading Coal and Iron Corporation owns all the stock of the debtor and has no assets except that stock and $400 in cash. The amount of the debt is not disputed but it is contended that it is not in reality a debt owing by the Corporation to the debtor but represents advances made to meet the fees of registrars and transfer agents and other expenses of maintaining the corporate existence of the Corporation. The Corporation was organized under a decree of the court below made pursuant to the opinion of the Supreme Court in Continental Insurance Co., et al. v. United States, Reading Company et al., 259 U.S. 156, 42 S.Ct. 540, 66 L.Ed. 871. In the light of this decree it is contended that the expenses in question were intended to be borne by the debtor, the Corporation being but an agency or device set up to facilitate the separation of the debtor from the Philadelphia and Reading Railway Company.
The court below did not pass upon these contentions, however, but held that since the prosecution of a suit might deprive the Corporation of its status as a stockholder of the debtor it should not be instituted. It is conceded that the only substantial asset of the Corporation is its stock in the debtor. If the debtor is insolvent that stock is worthless and the debt, even if valid, is uncollectible. Consequently, it is only if the debtor is found to be solvent that it will become necessary to determine the validity of the debt and the proper manner of enforcing it or preserving it for the reorganized company.
The Philadelphia and Reading Coal and Iron Corporation has moved to dismiss this appeal. We find the motion to be without merit. It is accordingly denied. The order appealed from is reversed with directions to the court below itself to determine the solvency or insolvency of the debtor without reference to a special master and thereupon to direct such action to be taken by the debtor with respect to the debt alleged to be due and owing by the Philadelphia and Reading Coal and Iron Corporation as justice may require. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543484/ | 997 A.2d 1235 (2010)
Joann MANLEY, individually, and as Administratrix of the Estate of Raymond Manley, Deceased, Appellants,
v.
Police Lt. Joel FITZGERALD and Police Sgt. Michael D. Young and Police Officer Joseph Smith and Police Officer Rubin Perkins and Police Officer Sean Bascom.
No. 2091 C.D. 2009.
Commonwealth Court of Pennsylvania.
Argued May 18, 2010.
Decided June 10, 2010.
*1237 Lek Domni, Philadelphia, for appellant, Joann Manley.
Eleanor N. Ewing, Philadelphia, for appellees.
BEFORE: PELLEGRINI, Judge, LEAVITT, and FLAHERTY, Senior Judge.
OPINION BY Judge PELLEGRINI.
Joann Manley, individually and as administratrix of the estate of her husband, Raymond Manley (together, the Manleys) appeals from the order of the Court of Common Pleas of Philadelphia County (trial court) granting the motion for summary judgment filed by Police Lt. Joel Fitzgerald, Police Sgt. Michael D. Young, Police Officer Joseph Smith, Police Officer Rubin Perkins and Police Officer Sean Bascom (collectively, the Officers) and dismissing the Manleys' suit against them for civil conspiracy, false arrest/imprisonment, malicious prosecution and intentional infliction of emotional distress following their arrest for narcotics violations and the subsequent dismissal of the charges. For the following reasons, we affirm.
On the evening of February 22, 2007, a gunman attempted to assassinate two Philadelphia police officers who had observed a drug deal while sitting in an unmarked police car. The gunman walked up to the car, pulled out his weapon and fired at point-blank range, but he somehow misfired. The police officers, who were unharmed, returned fire, but the gunman escaped. The next evening, Philadelphia police officers saturated the five-block area surrounding the shooting in an attempt to catch the gunman or learn any information about him.
Two of those officers set up a narcotics surveillance on the 5000 block of Tacoma Street and between 10:00 and 11:30 p.m. observed 11 drug transactions at the doorway of 5048 Tacoma Street, just across the street from where the officers were parked. The man at the door, later identified as Levoin Manley (Levoin), the adult son of the Manleys, communicated with his customers by whistling and yodeling, sometimes from inside the house. When the customers came to the door, Levoin went inside the house and returned with the drugs. The house was owned by the Manleys, who lived there with Levoin and their other son. Levoin was living with his parents there because he was under house arrest and electronic monitoring while awaiting trial following a shooting. Joann Manley later testified that she and her husband were at home at the time when the drug deals occurred and that she was doing work in the dining room until approximately 11:00 p.m. Based upon their observations, the two officers obtained a warrant to search the property.
The following evening, the five defendant Officers executed the search warrant and entered the Manleys' home. Levoin and his parents were at home, and they were secured in the living room. The Officers then conducted the search and found a freezer in a room off of the kitchen that contained 315 Ziploc packets of crack cocaine, a 16 gram chunk of crack cocaine, a bottle containing five Oxycodyne pills under the name of another person, over $1,000 in cash, and several hundred new and unused packets. They also discovered a black trash bag inside the backyard barbeque grill containing three large Ziploc bags of marijuana and an additional 21 *1238 packets of crack cocaine in one of the upstairs bedrooms. Levoin also had 19 Ziploc bags of marijuana on his person.
At this point, the Manleys allege that the Officers questioned Levoin about the shooting from two nights earlier. Levoin denied any knowledge of the incident, at which time Joann Manley, in her deposition, testified that the Officers threatened that unless Levoin provided them with information about the shooting they would arrest his parents too. When Levoin continued to maintain that he knew nothing of the incident, all three Manleys were placed under arrest and charged with violations of the Pennsylvania Controlled Substance, Drug, Device and Cosmetic Act of 1972.[1] The Officers contest that they made any threats before placing the Manleys under arrest.
The Manleys were handcuffed and transported in a paddy wagon for processing and then to jail. Bail was set, but they were unable to pay it, so they were taken to a state prison for approximately 10 days until their preliminary hearing. At the preliminary hearing, the prosecutors only presented evidence against Levoin, so the charges against the Manleys were dismissed for lack of evidence. Levoin was later convicted in federal court for possession of crack cocaine with intent to distribute and distribution of crack cocaine.
Following the dismissal of charges against the Manleys, the Commonwealth filed a forfeiture petition against them in the trial court. The petition sought the forfeiture of 5048 Tacoma Street because it was used to commit and/or facilitate violations of the Controlled Substance Act. The Manleys entered into a stipulation and agreement with the Philadelphia District Attorney's Office to settle the forfeiture action. In the stipulation and agreement, the forfeiture petition was withdrawn without prejudice. The Manleys were allowed to keep their house, but they agreed that it was used to commit and/or facilitate violations of the Controlled Substance Act, that the district attorney could prove such violations at trial, that the house would be forfeited if any future violations occurred, and that they would not transfer or lease the property to anyone without the prior permission of the Commonwealth.
After all of these events had occurred, the Manleys instituted the instant civil action against the Officers alleging civil conspiracy, false arrest/imprisonment, malicious prosecution and intentional infliction of emotional distress stemming from their arrest and the circumstances surrounding it. The complaint alleged that the Officers had no probable cause to arrest them and only did so in retaliation because Levoin could not provide any information to the Officers regarding the shooting two nights earlier. The Officers moved for summary judgment, which the trial court granted, holding that all counts were meritless because the Officers had probable cause to arrest the Manleys. This appeal followed.[2]
Both sides agree that the causes of action cannot be maintained against the Officers if they had probable cause to arrest the Manleys for constructive possession of illegal narcotics because the elements of *1239 none of the causes of action could be met if the Officers had probable cause. The Manleys argue that the Officers did not have probable cause that they constructively possessed the confiscated drugs because there was no evidence that either of them ever exercised an intent to control the drugs. Rather, they were merely present in a house that contained narcotics, which is insufficient for constructive possession and would convert constructive possession into a strict liability crime. They contend further that the Officers knew they had no probable cause and arrested them solely because Levoin could not provide them with information concerning the shooting. The Officers contend that they arrested the Manleys solely because they had probable cause to do so, and that even if the alleged threats were true, they are immaterial and the outcome of the case would not change.
Normally, in a case such as this one, before we address the merits, we would consider whether the Officers are protected from the Manleys' claims by the tort immunity granted by the Political Subdivision Tort Claims Act.[3] However, the Manleys do not raise this issue at all, and the Officers only raise it for the first time at the very end of their brief without discussing it in any detail. While tort immunity can be raised at any time, Redland Soccer Club, Inc. v. Department of the Army and Department of Defense of the United States, 548 Pa. 178, 696 A.2d 137 (1997), because it was not briefed and it is not necessary to resolve this case, we will not address it.
Probable cause is a much lower standard than proof beyond a reasonable doubt, the standard that was extant in the above-cited cases. "Rather, probable cause is a reasonable ground of suspicion supported by circumstances sufficient to warrant that an ordinary prudent person in the same situation could believe a party is guilty of the offense charged." Turano v. Hunt, 158 Pa.Cmwlth. 348, 631 A.2d 822, 825 (1993). See also Bruch v. Clark, 352 Pa.Super. 225, 507 A.2d 854 (1986). Additionally, if probable cause is shown to exist, the arresting officer's motive, even if malicious, is immaterial. Turano, 631 A.2d at 824; Bruch, 507 A.2d at 856. Likewise, an acquittal or other adjudication of innocence at a subsequent proceeding does not establish a lack of probable cause at the time of arrest. Turano; McGriff v. Vidovich, 699 A.2d 797, 799 (Pa.Cmwlth.1997). Whether the Officers had probable cause to arrest the Manleys is determined by whether the Officers had a reasonable suspicion that the Manleys had constructive possession of illegal narcotics.
Constructive possession is "a legal fiction, a pragmatic construct to deal with the realities of criminal law enforcement. Constructive possession is an inference arising from a set of facts that possession of the contraband was more likely than not." Commonwealth v. Mudrick, 510 Pa. 305, 308, 507 A.2d 1212, 1213 (1986). Constructive possession entails the power to control the contraband and the intent to exercise that control. Commonwealth v. Macolino, 503 Pa. 201, 206, 469 A.2d 132, 134 (1983). It may be inferred from the totality of the circumstances using circumstantial evidence. Macolino, 503 Pa. at 206, 469 A.2d at 134. Constructive possession may be found "in one or more actors where the item in issue is in an area of joint control and equal access." Commonwealth v. Valette, 531 Pa. 384, 388, 613 A.2d 548, 550 (1992) (emphasis added).
A review of numerous cases shows that the phrase "joint control and equal access" *1240 is the defining criteria for whether constructive possession exists. In every case examined since Macolino in 1983,[4] a defendant who lived in the dwelling where the drugs were found and who had access to the specific places in the dwelling where the drugs were located was found to have constructively possessed them, irrespective of how many other people also had equal access to the drugs or if the drugs were hidden. These cases include Macolino itself (both husband and wife had equal access to bedroom where drugs and paraphernalia were found and so both constructively possessed them); Mudrick (drugs found in living room and bedroom; defendant had constructive possession because he and his girlfriend both lived in the house and had equal access to all of it); Commonwealth v. Carroll, 510 Pa. 299, 507 A.2d 819 (1986) (defendant, his wife and his step-daughter were staying in a hotel room; defendant constructively possessed drugs found in the pocket of a pair of his wife's pants that were lying on the floor as well as drug paraphernalia located throughout hotel room); Commonwealth v. Walker, 874 A.2d 667 (Pa.Super.2005) (defendant lived in basement of home; he constructively possessed drugs found in basement even though two other people shared the home with him); Commonwealth v. Aviles, 419 Pa.Super. 345, 615 A.2d 398 (1992) (defendant leased apartment and subleased certain rooms in it to her sister and brother-in-law; drugs were found in the portion of the apartment where sister and brother-in-law lived, but defendant had constructive possession of the drugs because there were no locks on the interior doors so she had access to those rooms); Commonwealth v. Parsons, 391 Pa.Super. 273, 570 A.2d 1328 (1990) (defendant constructively possessed drugs and paraphernalia located in every room of the house he shared with his girlfriend); Commonwealth v. Santiesteban, 381 Pa.Super. 18, 552 A.2d 1072 (1989) (defendant lived in house with his girlfriend; he constructively possessed drugs hidden inside a heating grate); Commonwealth v. Kitchener, 351 Pa.Super. 613, 506 A.2d 941 (1986) (defendant, who had little or no criminal history, shared house with fugitive boyfriend with long criminal history; defendant constructively possessed drugs found in freezer, under living room chair and under a bed).[5]
*1241 Applied to the current case, the Officers only needed to reasonably suspect that the Manleys constructively possessed the illegal drugs found in their freezer, grill and bedroom in order to arrest them. It is undisputed that the Manleys owned and lived in 5048 Tacoma Street. It is also undisputed that they had access to their own freezer, their own barbeque grill and the bedroom where Levoin was staying. Additionally, they were both present in the home while Levoin was conducting his drug deals, yodeling and whistling. Because all the requirements for constructive possession have been met, the Officers had probable cause to arrest the Manleys. Furthermore, the law is clear that even if it was true that the only reason the Manleys were arrested was in retaliation for Levoin not having information regarding the shooting, this motive, whether proper or improper, was immaterial because probable cause to arrest the Manleys otherwise existed. Similarly, the fact that the charges against the Manleys were dismissed because the Commonwealth only presented evidence against Levoin at the preliminary hearing is completely irrelevant to this proceeding. Simply put, if the Manleys wished to avoid arrest and a possible conviction for constructive possession of illegal narcotics, the only surefire way would have been to prevent their son from conducting his extensive drug dealing operation from their house.
Turning now to each individual count in the complaint, it is clear that the trial court correctly held that all must fail as a matter of law. The elements of false arrest/false imprisonment are: (1) the detention of another person (2) that is unlawful. "An arrest based upon probable cause would be justified, regardless of whether the individual arrested was guilty or not." Renk v. City of Pittsburgh, 537 Pa. 68, 76, 641 A.2d 289, 293 (1994). Here, the Officers had probable cause to arrest the Manleys, so the arrest and imprisonment were lawful.
The elements of malicious prosecution are: (1) institution of proceedings against the plaintiff without probable cause and with malice, and (2) the proceedings were terminated in favor of the plaintiff. Turano, 631 A.2d at 824. Again, this cause of action fails because the Officers had probable cause to arrest the Manleys.
The elements of intentional infliction of emotional distress are: (1) a person who by extreme and outrageous conduct (2) intentionally or recklessly causes (3) severe emotional distress to another. Carson v. City of Philadelphia, 133 Pa.Cmwlth. 74, 574 A.2d 1184 (1990). Police officers doing their job by arresting people when they have probable cause to do so certainly falls far short of extreme or outrageous conduct. Likewise, because their other claims fail, the Manleys' civil conspiracy claim fails also.
Accordingly, the order of the trial court is affirmed.
*1242 ORDER
AND NOW, this 10th day of June, 2010, the order of the Court of Common Pleas of Philadelphia County dated December 4, 2009, is affirmed.
NOTES
[1] Act of April 14, 1972, P.L. 233, as amended, 35 P.S. §§ 780-101-780-144.
[2] The standard of review of the trial court's order granting summary judgment is limited to deciding whether the court committed an error of law or abused its discretion. Barra v. Rose Tree Media School District, 858 A.2d 206 (Pa.Cmwlth.2004). Summary judgment may be granted only in those cases in which the record clearly shows that there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. In Re Estate of Ross, 815 A.2d 30 (Pa. Cmwlth.2002).
[3] 42 Pa.C.S. §§ 8501-8564.
[4] The Manleys rely on two pre-Macolino cases where the defendant lived in the dwelling where the drugs were found and had access to that area of the dwelling but were nevertheless found not to have constructive possession. They are Commonwealth v. Fortune, 456 Pa. 365, 318 A.2d 327 (1974) and Commonwealth v. Luddy, 281 Pa.Super. 541, 422 A.2d 601 (1980). In Fortune, the defendant was the owner of the house. She was upstairs when the police searched the house and found a large quantity of drugs lying on the kitchen floor surrounded by several house guests. The Court's rationale was that there was no proof that the owner of the house knew the drugs were on the premises. In Luddy, the defendant was one of several adult family members who lived in the home. Drugs were found in a refrigerator drawer, and the defendant was cooking in the kitchen when police arrived. The defendant was found not to constructively possess the drugs because there were other adults present, and the drugs could have belonged to any of them.
Fortune and Luddy are at odds with every case since Macolino in 1983, all of which held that constructive possession was proven simply by living in the dwelling and having access to the place where the drugs were found. In fact, the dissenting opinion in Mudrick concluded that the pre-Macolino cases had been overruled sub silentio. Mudrick, 510 Pa. at 311, 507 A.2d at 1215. Nothing in our exhaustive review of the case law contradicts this conclusion.
[5] On the other hand, since Macolino, where the defendant either did not live in the dwelling or did not have access to the specific part of the dwelling where the drugs were found, constructive possession has been found not to exist. See e.g. Valette (defendant did not constructively possess drugs that were found hidden in kitchen cabinet and under floorboards in bedroom of apartment where defendant was located because there was no proof he lived there); Commonwealth v. Rodriguez, 422 Pa.Super. 44, 618 A.2d 1007 (1993) (defendant was found standing in an apartment closet where drugs were found and was holding key to apartment in his hand but did not constructively possess the drugs in the closet because there was no evidence he lived there); Commonwealth v. Smith, 345 Pa.Super. 196, 497 A.2d 1371 (1985) (defendant lived with his brother and sister-in-law; defendant did not constructively possess drugs found in home because most of them were in the brother's bedroom and there was no evidence that defendant had access to the bedroom). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1644785/ | 4 So. 3d 1240 (2009)
SIEMENS BLDG. TECHNOLOGIES
v.
IRVIN.
No. 4D07-4221, 4D07-4744.
District Court of Appeal Florida, Fourth District.
April 8, 2009.
Decision without published opinion. Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543530/ | 997 A.2d 210 (2010)
202 N.J. 311
STATE of New Jersey, Plaintiff-Respondent,
v.
Laura MORAN, Defendant-Appellant.
A-55 September Term 2009.
Supreme Court of New Jersey.
Argued April 27, 2010.
Decided July 13, 2010.
*212 Jonathan H. Lomurro and Donald M. Lomurro, Freehold, argued the cause for *213 appellant (Lomurro, Davison, Eastman & Munoz, attorneys; Donald M. Lomurro, of counsel; Jonathan H. Lomurro and Carrie A. Lumi, Freehold, on the brief).
Carey J. Huff, Assistant Prosecutor, argued the cause for respondent (Luis A. Valentin, Monmouth County Prosecutor, attorney; Patricia B. Quelch, Assistant Prosecutor, on the letter brief).
Justice ALBIN delivered the opinion of the Court.
Defendant Laura Moran was found guilty in municipal court of reckless driving, a violation of N.J.S.A. 39:4-96. In addition to imposing penalties specifically referenced in N.J.S.A. 39:4-96, the municipal court judge suspended defendant's driving privileges for forty-five days under N.J.S.A. 39:5-31. The Superior Court, Law Division, in a trial de novo, upheld defendant's reckless-driving conviction and imposed the same sentence. The Appellate Division affirmed and set forth standards for the imposition of license suspensions under N.J.S.A. 39:5-31 in future cases. State v. Moran, 408 N.J.Super. 412, 432-33, 975 A.2d 480 (App.Div.2009).
N.J.S.A. 39:5-31 authorizes a municipal court or Law Division judge to "revoke the license of any person to drive a motor vehicle, when such person shall have been guilty of such willful violation of any of the provisions of [N.J.S.A. 39:1-1 to 39:5G-2] as shall, in the discretion of the [judge], justify such revocation."[1] Defendant claims that she did not receive "fair notice" that she was facing a potential license suspension "hidden" in N.J.S.A. 39:5-31. She also challenges the constitutionality of N.J.S.A. 39:5-31, contending that the statute is vague and overbroad, and gives "unbridled discretion" to judges to impose a license suspension without any statutory limitation on the length of such a suspension.
We hold that the license-suspension provision of N.J.S.A. 39:5-31, which is published in the Motor Vehicle Code of the New Jersey Statutes Annotated, is not "hidden," and that defendant, like all motorists, is presumed to know the law. To ensure that license suspensions meted out pursuant to N.J.S.A. 39:5-31 are imposed in a reasonably fair and uniform manner, so that similarly situated defendants are treated similarly, today we define the term "willful violation" contained in N.J.S.A. 39:5-31 and enunciate sentencing standards to guide municipal court and Law Division judges. In setting these guidelines, we exercise our supervisory authority over our court system for the purpose of achieving just ends. N.J. Const. art. VI, § 2, ¶ 3; State v. Romero, 191 N.J. 59, 74-75, 922 A.2d 693 (2007). The procedural protections we put in place will obviate the constitutional concerns raised by defendant.
Based on the guidelines established in this opinion, we remand to the municipal court to consider anew whether to impose a suspension and, if so, the length of the suspension. We therefore reverse the judgment of the Appellate Division upholding the Law Division's forty-five-day suspension of defendant's driving privileges.
I.
A.
At her trial in the Aberdeen Municipal Court, defendant Laura Moran represented *214 herself. The State called one witness, Officer Roger Peter of the Aberdeen Township Police Department, who testified to observations he made while parked in a patrol car near the intersection of Lloyd Road and Route 34, shortly before 2:00 a.m. on August 3, 2007. Stopped at a red light in the northbound lane of Route 34 were a tractor-trailer and, behind it, one other vehicle. Just as the light was turning green, defendant, driving a four-door sedan northbound on Route 34 in the left-turn-only lane, passed the two vehicles without making a left turn. Instead, defendant crossed the Lloyd Road intersection and cut in front of the tractor-trailer. But for the fortuity of the light turning green, it did not appear to the officer that defendant could have stopped for the red light.
Officer Peter then stopped defendant's car. From the outset, defendant was uncooperative. She repeatedly refused to hand over her license, registration, and insurance cards, to turn the ignition off, and to step out of the car. Eventually, with the assistance of a back-up officer, Officer Peter was able to open defendant's car door, and then she voluntarily exited the vehicle. Officer Peter determined that defendant was not intoxicated, and defendant permitted the officers to retrieve her documents from the car. Officer Peter then issued defendant summonses for reckless driving, N.J.S.A. 39:4-96, improper display of a license plate, N.J.S.A. 39:3-33, and obstruction of the windshield, N.J.S.A. 39:3-74.
Defendant took the stand, testifying that, on the evening in question, she "was not in a good mood, driving home [and] was pretty upset about things in [her] life." She stated that "[t]he reason why I went in front of the tractor trailer is because I wanted to get into that lane, I was in the other lane. That's why I went in front of it."
The court found defendant guilty of the three motor vehicle charges and imposed a $206 fine, $33 in costs, and a forty-five-day license suspension for reckless driving; a $36 fine and $33 in costs for the improperly displayed plate; and a $36 fine and $33 in costs for the obstructed windshield. During the proceedings, defendant was highly emotional, obstreperous, and disruptive. After the court rendered its decision, defendant responded, "I'm going home and I don't drive reckless.... I have a perfect driving record, I'm not taking [the ticket]."[2] Before sentencing defendant, the court reviewed defendant's history of numerous motor vehicle violations.[3] The court justified the imposition of a license suspension based on both defendant's driving in a "willful and wanton [manner] in violation of the rights and safety of others and [her]self" and her "demeanor" in court.
B.
The Superior Court, Law Division, in a trial de novo on the record, found defendant *215 guilty of reckless driving and imposed the same fines, costs, and forty-five-day license suspension meted out by the municipal court.[4] The Law Division found that defendant's willful violation of the reckless-driving statute, combined with her past driving infractions, justified the license suspension. At this proceeding, defendant had the services of appointed counsel and challenged the constitutionality of N.J.S.A. 39:5-31, which empowers the court to suspend a defendant's license. The Law Division rejected defendant's constitutional challenge that the statute invested municipal court judges with "unbridled discretion" and did not give fair notice of the penalty.[5]
C.
The Appellate Division upheld the constitutionality of N.J.S.A. 39:5-31. State v. Moran, 408 N.J.Super. 412, 420-21, 975 A.2d 480 (App.Div.2009). The panel determined that the legislative and administrative development of the motor-vehicle-point system, which allows for an administrative license suspension when a driver accumulates a specified number of points related to traffic violations, did not repeal by implication N.J.S.A. 39:5-31, which predated the promulgation of the point system. Id. at 422-24, 975 A.2d 480. The panel also found that defendant had "fair notice" of the potential of a driver's license suspension, as contained in N.J.S.A. 39:5-31, because the statute is a "published law of this State" and "[e]very person is conclusively presumed to know the law." Id. at 425, 975 A.2d 480 (citation and internal quotation marks omitted).
Additionally, the panel rejected defendant's arguments that the statutory language of N.J.S.A. 39:5-31 is constitutionally overbroad and vague. Id. at 427-29, 975 A.2d 480. The panel did "appreciate defendant's concern that no guidelines or standards are provided, nor is any limit set, in N.J.S.A. 39:5-31." Id. at 432, 975 A.2d 480. However, it concluded that arbitrary municipal court sentences could be corrected at a sentencing de novo in the Law Division and by the process of appellate review. Ibid. Although the panel found that the statute was not constitutionally infirm, it offered guidance to judges in exercising their discretion whether to suspend a license under N.J.S.A. 39:5-31 and, if so, the length of the suspension. Id. at 433, 975 A.2d 480. It directed judges to consider (1) the factors discussed in Cresse v. Parsekian, 81 N.J.Super. 536, 549, 196 A.2d 256 (App.Div.1963), aff'd, 43 N.J. 326, 204 A.2d 348 (1964); (2) relevant aggravating and mitigating factors in the Code of Criminal Justice, N.J.S.A. 2C:44-1(a) and (b), that could be tailored to motor vehicle offenses; and (3) "the length of suspensions authorized for specific offenses in the Motor Vehicle Code as a basis for comparison and proportionality." Moran, supra, 408 N.J.Super. at 433, 975 A.2d 480.
Applying those standards, the panel reviewed defendant's extensive history of driving infractions, the seriousness of the offense, and the need for deterrence and concluded that the forty-five day suspension constituted an appropriate exercise of discretion. Id. at 433-34, 975 A.2d 480.
D.
Defendant filed a petition for certification raising three challenges to the validity *216 of N.J.S.A. 39:5-31. Defendant claims that the statute contains a "hidden" penalty provision that denied her fair notice of the potential sentence she was facing; the statute is "constitutionally vague or overbroad"; and the statute confers on judges "unbridled discretion to impose, without terms or limitation," a period of license suspension, in violation of the due-process guarantees of the Fourteenth Amendment to the United States Constitution and Article I, Paragraph 1 of the New Jersey Constitution. We granted certification. State v. Moran, 200 N.J. 547, 985 A.2d 645 (2009).
We now address each of those issues.
II.
We agree with the Appellate Division that defendant was on fair notice of the penalty provisions that flowed from a reckless-driving violation. Moran, supra, 408 N.J.Super. at 425, 975 A.2d 480. Ignorance of a sentencing provision that is published in the codified laws of this Stateand available in bound volumes located in most law firms, in county and state offices, and in many other locales, and on-lineis not a defense. Every person is presumed to know the law. Barlow v. United States, 32 U.S. (7 Pet.) 404, 411, 8 L.Ed. 728, 731 (1833) (noting "common maxim, familiar to all minds, that ignorance of the law will not excuse any person, either civilly or criminally"). The claim that the penalty provision of N.J.S.A. 39:5-31 is "hidden" from reckless drivers is not supported by general legal principles or reality. Practitioners in our municipal courts are well aware of this statutory provision. See 25 New Jersey Practice, Motor Vehicle Law and Practice § 8:22, at 198 (Robert Ramsey) (4th ed. 2009) (noting that N.J.S.A. 39:5-31 is used in municipal courts); State v. Dunn, 45 N.J.Super. 224, 227-28, 132 A.2d 318 (App. Div.1957) (noting that in speeding case court may revoke driver's license when motorist is guilty of "willful violation" as set forth in N.J.S.A. 39:5-31); State v. Bookbinder, 76 N.J.Super. 443, 445, 184 A.2d 869 (Cty.Ct.1962) (same), aff'd, 82 N.J.Super. 179, 197 A.2d 35 (App.Div. 1963).
The reckless-driving statute provides that a conviction for a first offense is punishable by a jail term not to exceed sixty days and/or a fine between $50 and $200. N.J.S.A. 39:4-96. Five points are also assessed against the defendant's driving record. N.J.A.C. 13:19-10.1.[6] Reckless driving, like many other offenses and violations defined in the New Jersey Statutes, is set forth in a particular statute that prescribes certain fixed penalties, but also is subject to a statutory provision that permits for a sentence enhancement. Oftentimes, a primary statute defining a violation or offense does not cross-reference a sentence-enhancement provision. Indeed, in the New Jersey Code of Criminal Justice, offenses defined in a particular statute do not necessarily cross-reference sentencing provisions found in other parts of the Code.[7]Compare N.J.S.A. *217 2C:11-1 to 2C:41-6.2 (Subtitle 2, "Definition of Specific Offenses"), with N.J.S.A. 2C:43-1 to 2C:45-4 (selected provisions of Subtitle 3, "Sentencing").
N.J.S.A. 39:5-31 authorizes the suspension of driving privileges for "such willful violation of any of the provisions of this subtitle." That statute is located in Chapter 5 of Title 39 ("Enforcement and Procedure") and is found in Subtitle 1, which encompasses all provisions from N.J.S.A. 39:1-1 to N.J.S.A. 39:5G-2. The sentencing-enhancement provision of N.J.S.A. 39:5-31 is in the Motor Vehicle Code, not secreted in statutory schemes dealing with taxation, the environment, or elections. We therefore reject defendant's argument that she was not on "fair notice" of a potential license suspension for reckless driving.
III.
We next turn to defendant's argument that N.J.S.A. 39:5-31 is "constitutionally vague or overbroad," therefore vesting in our municipal court and Law Division judges "unbridled discretion" to impose a period of license suspension without limitation. The State is not indifferent to defendant's claim and understands that N.J.S.A. 39:5-31, read literally, gives sweeping discretion to judges to impose license suspensions. The State asks this Court to construe N.J.S.A. 39:5-31 in a reasoned way by enunciating standards channeling the discretion exercised by judgesthat will render the statute constitutional.
A.
To discern the meaning of a statute, we must begin by looking at its language. N.J.S.A. 39:5-31 provides:
The director or any magistrate before whom any hearing under this subtitle is had may revoke the license of any person to drive a motor vehicle, when such person shall have been guilty of such willful violation of any of the provisions of this subtitle as shall, in the discretion of the magistrate, justify such revocation.[8]
The reckless-driving statute, N.J.S.A. 39:4-96, falls within the "subtitle" referenced by N.J.S.A. 39:5-31. Therefore, a driver who engages in a "willful violation" of the reckless-driving statute is subject to a license revocation if the violation "shall, in the discretion of the magistrate, justify such revocation." N.J.S.A. 39:5-31 (emphasis added). A person violates the reckless-driving statute when he or she "drives a vehicle heedlessly, in willful or wanton disregard of the rights or safety of others, in a manner so as to endanger, or be likely to endanger, a person or property." N.J.S.A. 39:4-96 (emphasis added).
Significantly, the term willful is used in both N.J.S.A. 39:4-96 and N.J.S.A. 39:5-31. The word "willful" is found in many provisions of the New Jersey Statutes Annotated. We must assign to that word its "generally accepted meaning, according to the approved usage of the language." N.J.S.A. 1:1-1; DiProspero v. Penn, 183 N.J. 477, 492, 874 A.2d 1039 (2005) ("We ascribe to the statutory words their ordinary meaning and significance...."). Willful has been defined as "deliberate, voluntary, or intentional," Webster's Unabridged Dictionary of the English Language 2175 (2001), "but not necessarily malicious," Black's Law Dictionary 1737 (9th ed. 2009); cf. N.J.S.A. 2C:2-2(b)(1) (defining "purposely"). Statutory *218 words must be read in context and in harmony with related provisions to give meaning to the legislation as a whole. DiProspero, supra, 183 N.J. at 492, 874 A.2d 1039.
When read in context with related provisions, the word willful conveys a different import in N.J.S.A. 39:4-96 and N.J.S.A. 39:5-31. In the reckless-driving statute, the word "willful" bespeaks a deliberate or intentional disregard of the lives and property of others in the manner in which a driver operates a vehicle. In N.J.S.A. 39:5-31, the term "willful" suggests a deliberate violation of certain motor-vehicle statutes. A willful violation of the reckless-driving statute necessarily involves a state of mind and conduct that exceed reckless driving itself. Thus, to trigger the license suspension provisions of N.J.S.A. 39:5-31, a driver must engage in an aggravated form of reckless driving.
The paradigm for distinguishing between reckless driving and a willful violation of the reckless-driving statute can be found in the New Jersey Code of Criminal Justice. A person who recklessly causes the death of another is guilty of manslaughter, N.J.S.A. 2C:11-4(b)(1), or vehicular homicide, N.J.S.A. 2C:11-5(a), whereas one who "recklessly causes death under circumstances manifesting extreme indifference to human life," N.J.S.A. 2C:11-4(a)(1), is guilty of aggravated manslaughter.[9] Reckless manslaughter involves the possible risk of causing death, whereas aggravated manslaughter involves the probable risk of causing death. See State v. Breakiron, 108 N.J. 591, 605, 532 A.2d 199 (1987); Model Jury Charges (Criminal), Murder, Passion/Provocation and Aggravated/Reckless Manslaughter (May 2009).
Those concepts have resonance in distinguishing between the reckless-driving statute, N.J.S.A. 39:4-96, and a willful violation of that statute, N.J.S.A. 39:5-31. We perceive the following demarcation: reckless drivers act in a way "likely to endanger[] a person or property," N.J.S.A. 39:4-96, and those willfully violating the reckless-driving statute engage in conduct that is highly "likely to endanger[ ] a person or property," see N.J.S.A. 39:4-96, 39:5-31. Thus, the difference between reckless driving and a willful violation of the reckless-driving statute is a matter of degree. The distinctions we draw will ensure that municipal court judges invoke N.J.S.A. 39:5-31 only in reckless-driving cases that present aggravating circumstances.[10]
We have defined those circumstances that will warrant a judge invoking the license-suspension provision of N.J.S.A. 39:5-31. Now, we must give guidance to judges in determining whether to impose a suspension for a willful violation of a motor vehicle statute and, if so, the appropriate length of the suspension.
B.
N.J.S.A. 39:5-31 grants a municipal court judge, for the willful violation of certain motor-vehicle statutes, the authority to revoke a motorist's driving privileges "as shall, in the discretion of the magistrate, justify such revocation." The statute itself provides no standards or guidelines to channel the discretion of municipal *219 court and Law Division judges who must determine whether to impose a license suspension for a "willful violation" of any of the applicable motor-vehicle statutes and, if so, for how long. Indeed, N.J.S.A. 39:5-31 places no limits on the outermost length of a license suspension that may be imposed.
We disagree with the Appellate Division in this case that the arbitrary application of a standardless sentencing provision will be less arbitrary when there are layers of appellate review. Moran, supra, 408 N.J.Super. at 432, 975 A.2d 480. The Law Division, if it finds a defendant guilty after a trial de novo from a municipal court conviction, is required to impose a new sentence. R. 3:23-8(e). Without guidelines, unbounded discretion exercised by a Law Division judge is no less a problem. Moreover, an appellate courtwithout guidelines or standards to applyis hardly in a position to determine whether the municipal court or Law Division has abused its sentencing discretion.
However a license to drive is denominated, either as a right or a privilege, a license suspension may not be imposed arbitrarily. The loss of driving privileges for a reckless-driving conviction constitutes a consequence of magnitude that triggers certain rights, such as the right to counsel. See Rodriguez v. Rosenblatt, 58 N.J. 281, 294-95, 277 A.2d 216 (1971); R. 7:3-2(b); Guidelines for Determination of Consequence of Magnitude, Pressler, Current N.J. Court Rules, Appendix to Part VII to R. 7:3-2 at 2309 (2010); see also State v. Hamm, 121 N.J. 109, 124, 577 A.2d 1259 (1990) (eschewing "outworn distinction" whether driving is right or privilege), cert. denied, 499 U.S. 947, 111 S.Ct. 1413, 113 L.Ed.2d 466 (1991). The suspension of a driver's license is a consequence of magnitude because a license to drive in this State "is nearly a necessity," as it is the primary means that most people use to travel to work and carry out life's daily chores. Hamm, supra, 121 N.J. at 124, 577 A.2d 1259. No one would suggest that a court can take away one's driving privileges on a whim or capriciously. Procedural safeguards apply to sentencing in our municipal courts and Superior Courts. See, e.g., N.J.S.A. 2C:43-2(e); R. 3:21-4; R. 7:9-1(b). The need for standards governing license suspensions touches on core constitutional principles.
Random and unpredictable sentencing is anathema to notions of due process. See United States v. Batchelder, 442 U.S. 114, 123, 99 S.Ct. 2198, 2204, 60 L.Ed.2d 755, 764 (1979) ("[V]ague sentencing provisions may pose constitutional questions if they do not state with sufficient clarity the consequences of violating a given criminal statute."); New Jersey State Parole Bd. v. Byrne, 93 N.J. 192, 210-12, 460 A.2d 103 (1983). Vague laws violate due process by failing to "provide adequate notice of their scope and sufficient guidance for their application." See State v. Cameron, 100 N.J. 586, 591, 498 A.2d 1217 (1985).
We have long recognized that "there can be no justice without a predictable degree of uniformity in sentencing." State v. Hodge, 95 N.J. 369, 379, 471 A.2d 389 (1984). Disparate sentencing undermines public confidence in the fairness of our justice system. Indeed, the dominant goal of the Code of Criminal Justice was uniformity in sentencing, State v. Kromphold, 162 N.J. 345, 352, 744 A.2d 640 (2000), replacing "the unfettered sentencing discretion of prior law with a structured discretion designed to foster less arbitrary and more equal sentences," State v. Roth, 95 N.J. 334, 345, 471 A.2d 370 (1984); see also N.J.S.A. 2C:1-2(b) (listing "general purposes of the provisions governing the sentencing of offenders," including *220 "[t]o safeguard offenders against excessive, disproportionate or arbitrary punishment" and "[t]o give fair warning of the nature of the sentences that may be imposed on conviction of an offense").
This Court often has taken affirmative steps to ensure that sentencing and disposition procedures, whether authorized by statute or court rule, will not produce widely disparate results for similarly situated defendants. See, e.g., State v. Brimage, 153 N.J. 1, 22-25, 706 A.2d 1096 (1998) (ordering Attorney General to promulgate plea offer guidelines to eliminate inter-county disparity in sentencing); State v. Yarbough, 100 N.J. 627, 643-44, 498 A.2d 1239 (1985) (adopting six criteria as general guidelines for judges in determining whether to impose concurrent or consecutive sentences), cert. denied, 475 U.S. 1014, 106 S.Ct. 1193, 89 L.Ed.2d 308 (1986), superseded in part by N.J.S.A. 2C:44-5; State v. Leonardis (Leonardis I), 71 N.J. 85, 97-98, 109, 363 A.2d 321 (1976) (requiring pretrial intervention programs be implemented according to formal, uniform guidelines and instituting procedures for judicial review to "alleviate existing suspicions about the arbitrariness of given decisions"), aff'd on reh'g, (Leonardis II), 73 N.J. 360, 388, 375 A.2d 607 (1977).
Cresse, supra, 81 N.J.Super. at 548-49, 196 A.2d 256, dealt with N.J.S.A. 39:5-30, a statute comparable to N.J.S.A. 39:5-31, and addressed the power of the Director of the then-Division of Motor Vehicles to impose administrative license suspensions for motor vehicle infractions.[11] The case arose in the context of an automobile accident that was purportedly caused by the defendant and resulted in the death of a passenger in another car. Id. at 539, 196 A.2d 256. N.J.S.A. 39:5-30 did not place a limitation on the length of the suspension that the Director could impose; nor did it set standards to control the exercise of his authority. Cresse, supra, 81 N.J.Super. at 548, 196 A.2d 256. The Appellate Division enumerated a number of factors that the Director should consider in determining whether to impose a license suspension for a motor vehicle violation and, if so, for how long. Id. at 549, 196 A.2d 256.[12] We affirmed. Cresse v. Parsekian, 43 N.J. 326, 204 A.2d 348 (1964).
In Cresse, supra, the Appellate Division recognized that it would be impossible to evaluate whether the Director abused his discretion if no applicable standards governed his decision-making authority. 81 N.J.Super. at 548, 196 A.2d 256. The case is but one example in which our courts have superimposed standards on the exercise of authority, granted to a judge or other government official, to ensure compliance with tenets of due process or fundamental fairness, thus avoiding a constitutional challenge.
Article VI, Section 2, Paragraph 3 of the New Jersey Constitution provides that "[t]he Supreme Court shall make rules governing the administration of all courts *221 in the State and, subject to the law, the practice and procedure in all such courts." To ensure uniformity in sentencing, and that defendants similarly situated areto a reasonable degreesimilarly treated, we draw on our constitutional powers, N.J. Const. art. VI, § 2, ¶ 3, to set standards for our municipal court and Law Division judges in exercising their discretion under N.J.S.A. 39:5-31. Cf. State v. Broom-Smith, 201 N.J. 229, 235-36, 989 A.2d 840 (2010) (exercising Court's constitutional supervisory authority to set standards for cross-assigning municipal court judges to other municipal courts). We essentially affirm the approach taken by the Appellate Division, which offered "guidance" by suggesting that municipal court and Law Division judges consider certain factors before imposing a license suspension. Moran, supra, 408 N.J.Super. at 433, 975 A.2d 480.
For ease of reference, we direct municipal court and Law Division judges to consider the following factors in determining whether to impose a license suspension under N.J.S.A. 39:5-31, and, if so, the length of the suspension: the nature and circumstances of the defendant's conduct, including whether the conduct posed a high risk of danger to the public or caused physical harm or property damage; the defendant's driving record, including the defendant's age and length of time as a licensed driver, and the number, seriousness, and frequency of prior infractions; whether the defendant was infraction-free for a substantial period before the most recent violation or whether the nature and extent of the defendant's driving record indicates that there is a substantial risk that he or she will commit another violation; whether the character and attitude of the defendant indicate that he or she is likely or unlikely to commit another violation; whether the defendant's conduct was the result of circumstances unlikely to recur; whether a license suspension would cause excessive hardship to the defendant and/or dependants; and the need for personal deterrence. Cf. N.J.S.A. 39:5-30c (enumerating factors to be considered by MVC in determining appropriateness of imposing maximum suspension of three years). Any other relevant factor clearly identified by the court may be considered as well. It is not necessarily the number of factors that apply but the weight to be attributed to a factor or factors.
Comparisons to motor vehicle statutes that impose mandatory license suspensions may also be a useful guide in some cases. For example, the assistant prosecutor who argued before this Court referenced the driving-while-intoxicated (DWI) statute, N.J.S.A. 39:4-50, which requires a license suspension between seven and twelve months for a first offense of driving with a blood alcohol level over .10 percent, N.J.S.A. 39:4-50(a)(1)(ii), to suggest that a license suspension in this case greater than that permitted for a first-time DWI might be excessive. See also N.J.S.A. 39:5-30b (authorizing MVC to suspend license for no longer than three years if license suspended three times in three years). Of course, here the suspension imposed was forty-five days.
A municipal court or Superior Court judge must articulate the reasons for imposing a period of license suspension. Cf. R. 7:9-1(b) (requiring municipal court to state reasons for sentencing in disorderly-person- and petty-disorderly-person-offense cases); R. 3:21-4(g) (requiring judges to state reasons for imposing sentence in criminal cases). Requiring a statement of reasons for suspending a license pursuant to N.J.S.A. 39:5-31, guided by the standards discussed above, will enhance appellate review and be a further safeguard against arbitrariness in sentencing. Cf. State v. Miller, 108 N.J. 112, 122, *222 527 A.2d 1362 (1987) (remanding for statement of reasons to facilitate appellate review).
IV.
Having defined the meaning of a "willful violation" under N.J.S.A. 39:5-31 and having set standards that will guide the discretion of judges imposing license suspensions under that statute, we conclude that the statute is neither vague nor overbroad, nor does it give unbridled discretion to sentencing judges. However, we reverse the Appellate Division, which affirmed the Law Division's forty-five day suspension of defendant's driving privileges, because neither the parties nor the municipal court and Law Division had the benefit of our ruling in this case. In fairness to defendant, we remand to the municipal court for proceedings consistent with this opinion.
For reversal and remandmentChief Justice RABNER and Justices LONG, LaVECCHIA, ALBIN, WALLACE, RIVERA-SOTO and HOENS7.
OpposedNone.
NOTES
[1] For purposes of N.J.S.A. 39:5-31, there is no meaningful distinction between revocation and suspension of driving privileges. See Moran, supra, 408 N.J.Super. at 432 n. 2, 975 A.2d 480; cf. N.J.A.C. 13:21-9.4(c) (including revocation and suspension in term "suspension of driving privilege" for purposes of license restoration).
[2] Defendant repeatedly refused to surrender her driver's license, as ordered by the court, and did not accede until threatened with contempt and arrest.
[3] At the time the municipal court reviewed defendant's history of moving violations, her driver's abstract revealed convictions for: improper passing in 1990, N.J.S.A. 39:4-85; failure to observe a traffic signal in 1991, N.J.S.A 39:4-81; speeding in 1991, N.J.S.A. 39:4-98; failure to yield to a pedestrian in 1992, N.J.S.A. 39:4-36; obstructing passage of other vehicles in 1993, N.J.S.A. 39:4-67; speeding in 2000, N.J.S.A. 39:4-98; unsafe operation of a motor vehicle in 2003, N.J.S.A. 39:4-97.2; careless driving in 2003, N.J.S.A. 39:4-97; obstructing passage of other vehicles in 2005, N.J.S.A. 39:4-67; and unsafe operation of a motor vehicle in 2006, N.J.S.A. 39:4-97.2.
[4] Defendant did not challenge the other motor vehicle convictions or the fines imposed. She also waived the argument that she should have been appointed counsel in municipal court.
[5] At some point, defendant's license suspension was stayed pending appeal. By that time, her driving privileges had been suspended for approximately twenty days.
[6] The Chief Administrator of the Motor Vehicle Commission (MVC) is authorized to administratively suspend the license of a driver who accumulates a specified number of points in a certain time frame. N.J.S.A. 39:5-30.8; see also N.J.A.C. 13:19-10.2 (setting forth periods of suspension).
[7] For example, the robbery statute, N.J.S.A. 2C:15-1, does not cross-reference various potential sentencing enhancements. Aside from the general punishment provisions applicable to first- and second-degree crimes, N.J.S.A. 2C:43-6(a)(1)-(2), a person convicted of robbery is exposed to a period of eighty-five percent parole ineligibility, N.J.S.A. 2C:43-7.2(a), (d)(9), a minimum term of ten years if certain weapons were used during the offense, N.J.S.A. 2C:43-6(g), and an extended term, N.J.S.A 2C:43-7(a), 2C:44-3.
[8] The definition of magistrate includes judges of the municipal court and Superior Court. N.J.S.A. 39:1-1.
[9] Under the manslaughter provision of the Code, a person acts recklessly "when he consciously disregards a substantial and unjustifiable risk" that death will result from his conduct. See N.J.S.A. 2C:2-2(b)(3) (defining "recklessly"); N.J.S.A. 2C:11-4(b)(1).
[10] Here, we apply N.J.S.A. 39:5-31 to the reckless-driving statute. We do not address how N.J.S.A. 39:5-31 would apply to other motor vehicle statutes.
[11] The New Jersey Motor Vehicle Commission is the successor agency to the Division of Motor Vehicles. N.J.S.A. 39:2A-4; L. 2003, c. 13, § 4 (approved Jan. 28, 2003).
[12] The Appellate Division directed the Director to consider the following factors: the facts which constitute the particular violation; whether the motorist was willful or reckless, or merely negligent, and, if merely negligent, how negligent; how long the motorist has been driving; whether this is his first offense; whether he has been involved in any accidents; his age and physical condition; whether there were any aggravating circumstances, such as drinking, or, on the other hand, whether there were extenuating circumstances.
[Cresse, supra, 81 N.J.Super. at 549, 196 A.2d 256.] | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543569/ | 55 B.R. 60 (1985)
In re KENILWORTH SYSTEMS CORPORATION, Debtor.
Bankruptcy No. 882-82273-20A.
United States Bankruptcy Court, E.D. New York.
September 6, 1985.
*61 Joseph M. Kraft, New York City, for Ernst Wille and Irving Tobin.
Robson, Miller & Osserman, New York City, for Kenilworth Corp.
DECISION AND ORDER
ROBERT J. HALL, Bankruptcy Judge.
This matter came to be heard by order to show cause of Ernest Wille and Irving Tobin in this Chapter 11 bankruptcy. Movants complain that debtor refuses to deliver and then redeem stock in Kenilworth Corporation owed to them under Kenilworth's reorganization plan. In opposition, debtor argues that Wille's transfer of his claim to Tobin violates securities laws, and accordingly, 11 U.S.C. § 1145 prohibits distribution to Mr. Tobin. The court finds that 11 U.S.C. § 1145 does not preclude debtor's duty under its reorganization plan. Accordingly, the court hereby orders debtor to issue the stock due to Mr. Tobin, (Mr. Wille's assignee), and to offer redemption forthwith pursuant to the reorganization plan.
FACTS
In July, 1983, Mr. Wille assigned his claim against Kenilworth to Mr. Tobin, and on November 5, 1984, the court approved the assignment. On July 22, 1985, the court determined that Kenilworth owed Mr. Wille $150,000 for a finder's fee. Pursuant to debtors confirmation plan approved by *62 the court on June 19, 1985, creditors were to receive one share of debtors stock for each three dollars of allowed debt, with a right to surrender the shares on September 7, 1985 against a sinking fund of $500,000.
DISCUSSION
The issue in this case is whether the transfer of Wille's claim to Tobin, and Tobin's consequent efforts to obtain and redeem shares received for the claim violates 11 U.S.C. § 1145.
Generally, 11 U.S.C. § 1145 sets forth the application of the Securities Act of 1933, and state securities laws, to the issuance and resale of securities in bankruptcy reorganization. Few cases have interpreted the detailed provisions of 11 U.S.C. § 1145, but legislative history reveals that 11 U.S.C. § 1145 was intended to give both debtors and creditors of debtors' estates exemptions from securities laws. See Orlanski, The Resale of Securities Issued in Reorganization Proceedings and the Bankruptcy Reform Act of 1978, 53 AM.BANKR.L.J. 327-362. As to creditors, 11 U.S.C. § 1145(b) allows those who receive securities as part of a reorganization plan, exemptions from securities laws requirements for the resale of securities. Thus, 11 U.S.C. § 1145(b) promotes creditor acceptance of reorganization plans by allowing certain creditors to accept a reorganization with a view to reselling securities obtained under the plan. Weintraub & Resnick, Bankruptcy Law Manual ¶ 8.27.
11 U.S.C. § 1145(b) provides that only underwriters and issuers of stock must comply with securities laws. Under 11 U.S.C. § 1145(b)(1)(A) an entity is an underwriter, and thus inelegible for exemption, if it purchases a claim or interest for the purpose of receiving securities under a plan with a view to distribute those securities.
In this case, Wille did not purchase his claim with a view to distribute securities; he filed a proof of claim as an original claimant with a view to satisfaction of his finder's fee. Therefore, Wille is not an underwriter. As to Tobin, Kenilworth argues that he is a "purchaser" because he acquired Wille's claim as security for a debt. The court finds that even if Tobin is a "purchaser", he took Wille's claim with a view to redeeming shares, not distributing shares. Tobin's intention to redeem is manifested by this Order to Show Cause. Therefore, Tobin is not an underwriter, and 11 U.S.C. § 1145 is inapplicable to both Wille and Tobin.
Assuming, nonetheless, that the language of 11 U.S.C. § 1145(b) implies that Wille or Tobin might technically be an underwriter, legislative history reveals that 11 U.S.C. § 1145 was not intended to draw "technical" underwriters into the same net as "real" underwriters. The House Report states
The securities exemption section also governs the redistribution of securities received under the plan. These provisions are necessary because the rigidity of the securities laws conflicts with the need for flexibility in bankruptcy cases. In its simplest form, the issue is under what circumstances may recipients of securities issued under a reorganization plan resell securities in public markets without registering under section 5 of the Securities Act.
Under the securities laws, if securities are taken "with a view to distribution", then the recipient may not sell unless a registration statement is filed and an appropriate prospectus is provided. The S.E.C. views all creditors receiving more than 1% of the issue as underwriters. From a bankruptcy perspective, unless creditors are permitted to dispose of securities issued under the plan in a public market without filing a registration statement, the flexibility of the plan is impaired. Thus, the resale provisions allow resale by creditors that are not real underwriters. Underwriter is defined to include only the traditional underwriter covered under former Securities and Exchange Commission Rule 133. The technical statutory underwriter is excluded because of the restrictive impact on bankruptcy plans. *63 H.R.Rep. No. 595, 95th Cong., 1st Sess. 237-38 (1977), U.S.Code Cong. & Admin. News, 1978, 5787, 6197. Thus, only "real" underwriters are subject to the registration requirements of the Securities Act. 5 Colliers on Bankruptcy ¶ 1145.02(2).
Assuming once again that Wille or Tobin is a "real" underwriter who intends to "distribute" shares, the court doubts that Kenilworth's obligation to Wille and Tobin would be affected by their status as underwriters. As underwriters, Wille and Tobin would owe no obligation to Kenilworth, but rather, to the buyers of their shares. Since Tobin wants his shares redeemed, there are no buyers to raise the issue of breach of 11 U.S.C. § 1145.
The court agrees with Kenilworth that Tobin is entitled to issuance of shares rather than Wille or his attorney, pursuant to the court's approval of assignment. Further, the confirmation plan provides that only the original holder of shares may participate in redemption, and therefore, only Tobin may redeem the shares against the sinking fund.
So Ordered. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543540/ | 997 A.2d 755 (2010)
2010 ME 55
Shelly MA et al.
v.
Patrick J. BRYAN.
Docket: Cum-09-447.
Supreme Judicial Court of Maine.
Submitted on Briefs: April 29, 2010.
Decided: June 24, 2010.
*756 Douglas J. Alofs, Esq., Robinson, Kriger & McCallum, Portland, ME, for Shelly Ma.
*757 Deborah A. Buccina, Esq., Douglas, Denham, Buccina & Ernst, Portland, ME, for Patrick Bryan.
Panel: SAUFLEY, C.J., and LEVY, SILVER, MEAD, GORMAN, and JABAR, JJ.
GORMAN, J.
[¶ 1] Shelly Ma and Nghia Lam, individually and on behalf of their two children (Ma), appeal from a judgment entered in the Superior Court (Cumberland County, Warren, J.) on a jury verdict in favor of Patrick J. Bryan on Ma's complaint for negligence and loss of consortium in connection with a motor vehicle accident. Ma contends that insufficient evidence exists in the record to support the jury's verdict, and that the court erred in denying Ma's motion for a new trial on this basis. We affirm the judgment.
I. FACTS AND PROCEDURE
[¶ 2] Because the jury found in favor of Bryan, we are required to view the evidence presented at trial in the light most favorable to him. See Cates v. Donahue, 2007 ME 38, ¶ 9, 916 A.2d 941, 943. On the morning of March 9, 2002, Shelly Ma was driving southwest on Warren Avenue in Portland. Ahead of Ma on the right, Bryan was exiting a parking lot and attempting to make a left turn onto Warren Avenue in order to head northeast. Bryan came to a full stop at the edge of the parking lot and first looked left because the closest traffic was coming from that direction and because he planned to turn in that direction. He saw a pickup truck approaching him on Warren Avenue, but noted that it had its right blinker on and was moving into the right-hand turn lane about two hundred feet from him, indicating that the truck was turning right into the parking lot from which Bryan was exiting.[1] Bryan saw no other vehicles approaching him from the left. He then looked right and saw no traffic coming from that direction that would interfere with his intended left turn. He pulled forward and, as he pulled forward, he looked to his left again. Bryan then immediately saw and collided with Ma.
[¶ 3] In 2007, Ma filed a complaint against Bryan in the Superior Court asserting claims for negligence and loss of consortium. The court conducted a jury trial in June of 2009. The verdict form required the jury to first determine the compound question, "Was Patrick Bryan negligent and was his negligence a cause of the March 9, 2002[,] accident?" The jury responded in the negative, and thus returned a verdict in favor of Bryan. The court denied Ma's subsequent motion for a new trial in which she argued that the verdict was manifestly wrong. See M.R. Civ. P. 59(a). Ma timely appeals.
II. DISCUSSION
[¶ 4] Ma contends that the court erred in denying her motion for a new trial. She argues, as she did before the trial court, that the jury's verdict was not supported by the evidence, and that Bryan was negligent as a matter of law pursuant to 29-A M.R.S. § 2053(4) (2009).[2] We review the factual findings underlying a motion for new trial for clear error, and the court's ultimate disposition on the motion for an abuse of discretion. Estate of Fournier, 2009 ME 17, ¶ 11, 966 A.2d 885, 888-89.
*758 [¶ 5] In considering Ma's motion, the trial court aptly wrote:
In this case, while the jury could certainly have reached a different result, the court cannot conclude that there was no credible evidence to support the jury's verdict. From Mr. Bryan's testimony, the jury could have concluded that Mr. Bryan looked to his left, saw only a truck that was positioned to take a right turn into the parking lot, estimated that he had enough time to pull out, then looked to his right and proceeded to cross the roadway. From the testimony and from photographic evidence, the jury could have concluded that it was not negligent for Mr. Bryan to have proceeded to pull out and cross Warren Avenue given the facts adduced at trial. Specifically, the jury could have concluded that, under the particular circumstances of this case, Mr. Bryan was not negligent just because he did not glance to his left a second time.
In order to reach its verdict, moreover, the jury did not actually have to conclude that Mr. Bryan was not negligent. It only had to conclude that plaintiffs had not proven by a preponderance of the evidence that Mr. Bryan was negligent. The jury could have concluded that there was an equal possibility either (1) that, with no negligence on Mr. Bryan's part, his view of Ms. Ma's vehicle was obscured by the truck or (2) that, because Ms. Ma was exceeding the speed limit, Mr. Bryan's estimate that he had enough time to cross the avenue (when he looked to his left and saw only the truck) was reasonable but proved to be incorrect.
We decline to disturb this carefully considered and well-reasoned decision.
[¶ 6] As the plaintiff and the party with the burden of proof at trial, Ma can succeed in challenging the verdict on appeal only if she can establish that the jury was compelled to find in her favor on each element of her claims. See Irish v. Gimbel, 2000 ME 2, ¶ 8, 743 A.2d 736, 738. This is no easy task, given that the jury was not required to believe any of Ma's testimony, even if that testimony was not disputed by Bryan. See Dionne v. LeClerc, 2006 ME 34, ¶ 15, 896 A.2d 923, 929.
[¶ 7] Furthermore, the jury is permitted to draw all reasonable inferences from the evidence. Garland v. Roy, 2009 ME 86, ¶ 17, 976 A.2d 940, 945. We have previously defined an inference as "a deduction as to existence of a fact which human experience teaches us can reasonably and logically be drawn from proof of other facts." Ginn v. Penobscot Co., 334 A.2d 874, 880 (Me.1975) (quotation marks omitted). Here, the jury reasonably could have inferred that Ma was speeding, or following the truck too closely, for example. As the court pointed out, the jury may have concluded that the reason Bryan did not see Ma at the time was because she was not there to be seen. Indeed, Bryan testified that he returned to the accident scene the next day to figure out "how ... [Ma's] car [got] there that fast." Even if Ma's testimony that she was not speeding was not controverted, the jury is not required to find that she was not speeding, and is not required to accept her version of the accident.
[¶ 8] Significantly, we have never vacated a jury verdict in favor of the defendant on the ground that the jury was compelled to find in favor of the plaintiff in a motor vehicle negligence case. We accord significant deference to jury verdicts because the jury is best situated to evaluate the credibility and demeanor of witnesses. The trial court, acting on a motion for a new trial is also due some level of deference because it, too, saw and heard the witnesses; our review of a transcript is a distant third. See Markley v. Semle, *759 1998 ME 145, ¶ 19, 713 A.2d 945, 950 ("The sifting and weighing of evidence is peculiarly the function of the trier." (quotation marks omitted)); Marr v. Shores, 495 A.2d 1202, 1206 (Me.1985) ("The justice before whom an action has been tried is in a far better position than an appellate court to know whether in light of his observations at trial the [jury's verdict is] wholly inconsistent with the proof [at trial]." (quotation marks omitted)). Nearly sixty years ago, our predecessors discussed trial testimony from the viewpoint of an appellate court when considering a motion for a new trial. They wrote:
Human nature is such, that when the driver of one automobile is in collision with another, or he has had any form of accident, the driver is often inclined to remember what he desires to remember. Accidents happen so quickly that there is neither time nor opportunity for the driver to observe all locations, incidents and circumstances. It is only after the accident has happened, and while the driver reviews the facts with a disturbed or uncertain mind, that he endeavors to recall the facts, and to convince himself perhaps, that he acted at the time in the manner that he knows he should have acted. As time goes on, he has so satisfied his own mind as to what happened, that he honestly believes that he actually remembers facts that show he was not at fault. Individuals differ so much in powers of observation, discrimination, and memory, that the members of a jury who hear testimony relating to an accident, have the opportunity to watch carefully the appearance, hesitancies, inconsistencies, and other "court room incidents" that may indicate false or erroneous testimony. A printed record of the testimony gives the reader nothing through ear and eye of some vital things that often lead to truth.
Memory and imagination are in close intellectual brotherhood, and it is difficult to tell what are real memory images and what are details filled in by imagination. The unconscious impressions so blend themselves with conscious realities that they often appear to make a harmonious whole. The only check on such mistaken, or fabricated, testimony is the appearance of the witness himself, the credible testimony of other witnesses, and the circumstances surrounding the transaction. The jury which has heard the testimony and seen the witnesses is, therefore, in a better position to decide disputed questions of fact, than is one who only reads a record.
Burtchell v. Willey, 147 Me. 339, 344-345, 87 A.2d 658, 662 (1952) (emphasis added). In 2010, it is still up to the jury, not us, to determine how credible the witnesses are. Anderson v. O'Rourke, 2008 ME 42, ¶ 17, 942 A.2d 680, 685.
[¶ 9] We are also generally barred from inquiring into the jury's deliberations. State v. Watts, 2006 ME 109, ¶ 15, 907 A.2d 147, 150. The reasons for this rule are compelling:
(1) the need for stability of verdicts; (2) the need to conclude litigation and desire to prevent any prolongation thereof; (3) the need to protect jurors in their communications to fellow jurors made in the confidence of secrecy of the jury room; (4) the need to save jurors harmless from tampering and harassment by disappointed litigants; (5) the need to foreclose jurors from abetting the setting aside of verdicts to which they may have agreed reluctantly in the first place or about which they may in the light of subsequent developments have doubts or a change of attitude.
Id. ¶ 16, 907 A.2d at 151 (quotation marks and emphasis omitted). Hence our adoption of M.R. Evid. 606(b), which prohibits a juror from testifying as to any statements made during deliberations or "to the effect *760 of anything upon that juror's or any other juror's mind or emotions as influencing the juror to assent to or dissent from the verdict or indictment or concerning any juror's mental processes in connection therewith." With these considerations in mind, we are permitted to inquire into the validity of a verdict only in very limited circumstances, for "serious allegations of juror bias in the context of juror dishonesty or inaccuracy in answering a voir dire questionnaire," for example. Watts, 2006 ME 109, ¶ 17, 907 A.2d at 151.
[¶ 10] In the instant matter, although Ma's motion for a new trial asserted that the jury's verdict was due to prejudice, bias, passion, or mistake of fact, Ma pointed to nothing that might demonstrate prejudice other than the fact that the verdict was not in her favor. The record is entirely devoid of any indication that the jury reached its verdict on any improper basis, and in the absence of any "verifiable external manifestations" of such impropriety, we must accept the verdict as is. Taylor v. Lapomarda, 1997 ME 216, ¶ 6, 702 A.2d 685, 687 (quotation marks omitted).
[¶ 11] We do not know, and we will never know, why the jurors did not believe that Ma had proved that Bryan was negligent. What we do know is that: (1) there is no evidence in the record of any juror bias, prejudice, or misconduct; (2) there is no evidence to support a suggestion that the jurors failed to follow the law; and (3) the trial court, which saw the witnesses at the same time and place as the jurors, concluded that the verdict was supportable. The jury's verdict is rational and not so "manifestly or clearly wrong that it is apparent that the conclusion ... was the result of prejudice, bias, passion, or a mistake of fact." Chiapetta v. Lumbermens Mut. Ins. Co., 583 A.2d 198, 201 (Me.1990) (quotation marks omitted).
The entry is:
Judgment affirmed.
NOTES
[1] The truck did turn right as Bryan expected.
[2] "An operator of a vehicle entering a public way from a private way must yield the right-of-way to a vehicle on the public way or to a pedestrian. After yielding, the operator of the vehicle must proceed cautiously." 29-A M.R.S. § 2053(4) (2009). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543875/ | 55 B.R. 229 (1985)
In re FIEDEL COUNTRY DAY SCHOOL, Debtor.
Bankruptcy No. 881-83963-20.
United States Bankruptcy Court, E.D. New York at Westbury.
November 21, 1985.
*230 Harvis & Zeichner, New York City (Nathan Schwed, of counsel), for Trustee James Barr.
Robert Pryor, Deputy Atty., Mineola, N.Y., for City of Glen Cove.
DECISION AND ORDER
ROBERT JOHN HALL, Bankruptcy Judge.
This matter came to be heard upon the objections of the trustee of this chapter 7 bankruptcy estate to both real estate taxes and obligations in lieu of taxes claimed by the City of Glen Cove. The court finds that evidence is necessary to resolve the issues raised by the parties and hereby orders the parties to set this matter down for further hearing before the Honorable Cecelia H. Goetz in Hauppauge.
FACTS
1. Debtor, as operator of a school and summer camp, had for many years enjoyed tax-exempt status in the City of Glen Cove. Despite its tax-exempt status, debtor made various payments to the City before this bankruptcy.
2. On December 16, 1981 debtor petitioned for bankruptcy reorganization under chapter 11 of the Bankruptcy Code.
3. On May 3, 1982, debtor sent an application for renewal of its tax exempt status to the City of Glen Cove.
4. On November 3, 1982, the City of Glen Cove denied debtor's application for tax exempt status because the application was filed three days late; and because debtor's use of the property had changed after entering bankruptcy.
5. Glen Cove filed proofs of claims amounting to over $70,000.00.
6. On April 6, 1983, the court ordered this case converted to a chapter 7 bankruptcy.
DISCUSSION
The trustee of debtor's chapter 7 bankruptcy estate argues that Glen Cove's claim for taxes should be denied because the City's tax status assessment violated the Bankruptcy Code automatic stay against post-petition action to obtain debtor's property; and in the alternative, Glen Cove's denial of tax exempt status contradicts state law. Glen Cove contends that the automatic stay does not apply to this case, and that debtor is precluded from arguing any misapplication of state law because debtor did not exhaust its state remedies.
11 U.S.C. § 362(a)(3) relieves pressure on debtors by prohibiting "any act to obtain possession of property of the estate" upon the filing of a petition for bankruptcy. In this case, Glen Cove did not violate the automatic stay because it did not attempt to "obtain possession" or threaten the debtor's assets.[1] Rather, the City merely made a non-binding assessment of debtor's estate. 11 U.S.C. § 505 vests the bankruptcy court with power to determine the legitimacy of tax assessments, and therefore, Glen Cove's only act to obtain possession of property was its filing of a proof of claim, which the Code allows. Glen Cove's determination that debtor's property is not tax-exempt is merely an allegation in support of its proof of claim and must be proven with evidence, in bankruptcy court.
*231 11 U.S.C. § 505(a)(1) permits the court to:
determine the amount or legality of any tax . . . whether or not paid, and whether or not contested before and adjudicated by a judicial or administrative tribunal of competent jurisdiction.
Glen Cove argued that its assessment of taxes should not be reviewed because the debtor did not initiate a New York State Article 78 proceeding to challenge the assessment and thus failed to exhaust its remedies against the city in state court. The court holds that the bankruptcy court has jurisdiction to redetermine post-petition taxes owed to a city even if a debtor does not contest the taxes under state law. The time and expense of filing state court lawsuits would only deplete the assets of the bankruptcy estate, since any state court action would be subject to a review in bankruptcy court pursuant to section 505. Moreover, Congress enacted section 505 specifically to protect creditors from the dissipation of estate assets which could result if creditors were bound by tax judgments which the debtor, due to his ailing condition, did not contest. In re Century Vault Co., 416 F.2d 1035, 1041 (3rd Cir. 1969); City of Amarillo v. Eakens, 399 F.2d 541, 544 (5th Cir.1968), cert. denied, 393 U.S. 1051, 89 S.Ct. 688, 21 L.Ed.2d 692 (1969); In re Northwest Beverage Inc., 46 B.R. 631 (Bankr.N.D.Ill.1985); 3 Collier on Bankruptcy 505-23 (15th ed. 1979); See also In the Matter of Fashion Wear Realty Co., Inc., 14 B.R. 287 (Bankr.S.D.N.Y. 1981).
The only issue of consequence relating to the amount and legality of tax claimed by Glen Cove is whether the debtor qualified as a non-profit, tax-exempt organization after April 30, 1982 pursuant to section 420-a of New York Real Property Law. Various contradictory allegations were made by the parties regarding debtor's activity and non-activity to prove debtor's status, but no testimony was taken, no evidence was offered, nor were any stipulations made to support the parties' assertions. Thus, an evidentiary hearing is necessary to resolve issues of fact.
Glen Cove's other claim for payments in lieu of taxes is based on an alleged contract, and once again the parties presented the court with nothing but contradictory allegations. Glen Cove claims that it gave consideration for debtor's payments in the form of forbearance of legal action to obtain tax revenue. The trustee of debtor's estate argues that any payments by debtor to Glen Cove were gratuities to promote harmony between town and gown. Thus, an evidentiary hearing is needed to resolve issues of fact relating to the matter of payments in lieu of taxes as well as for the matter of taxes.
SO ORDERED.
NOTES
[1] Cf. In re Midwest Emery Freight System, Inc., 48 B.R. 566 (Bankr.N.D.Ill.1985); In the Matter of Shippers Interstate Service Inc., 618 F.2d 9 (9th Cir.1980) (where assets of bankruptcy estate are not threatened by determination of labor dispute involving debtor in reorganization, court should not stay proceedings). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543877/ | 567 A.2d 1131 (1989)
Rhoda-Ann CLOUTIER
v.
John P. CLOUTIER, Jr.
No. 88-75-Appeal.
Supreme Court of Rhode Island.
December 29, 1989.
Alan T. Dworkin, Dworkin & Brady, Warwick, for plaintiff.
John D. Lynch, Lynch, McKiernan & Costello, Warwick, for defendant.
OPINION
MURRAY, Justice.
This case is before the court on appeal by the defendant, John P. Cloutier, Jr. (husband) from a property-settlement order of the Family Court that awarded the plaintiff, Rhoda-Ann Cloutier (wife), 80 percent of the equity in the marital domicile and alimony of $225 per week for a four-year period. The husband also claims that the trial justice erred in placing a value on the marital domicile that differed from valuations given by each party's expert witness. We find that although the trial justice did not err in determining a value for the marital domicile, the division of this asset was not appropriate in light of previous decisions of this court. We therefore revise the division of the marital domicile and award the wife 60 percent rather than 80 percent of the equity in the marital domicile.
The Cloutiers were married on April 4, 1964. During most of the twenty-year marriage the wife was a full-time homemaker and provided approximately 95 percent of the homemaker services. She was the primary caretaker for the couple's two children. Both children are now adults. The wife later attended school, obtained an associate's degree, and became a registered nurse. She was employed at the time of the trial at a blood bank as a phlebotomist earning $207 per week. The court found that while the wife was employed she contributed financially to house payments.
The husband became employed outside the home early on in the marriage. He is presently employed as an executive at Digital Corporation earning $669 per week. Over the years his salary increased substantially from $14,000 per year to $65,400 *1132 per year. As he changed jobs the family moved from state to state. The couple purchased homes in the states where the husband was employed.
The court found that the couple was able to purchase these homes with the assistance of Ralph Northup, the wife's father. He had admitted at trial that he had given these substantial financial contributions to both the wife and the husband.
On December 30, 1986, the wife filed a complaint for divorce in Kent County Family Court on the grounds of irreconcilable differences. On January 13, 1987, the husband filed a counterclaim for divorce also on the grounds of irreconcilable differences. Both parties sought an assignment of the marital assets.
A hearing was held over several days between November 2 and December 11, 1987. In the end the trial justice divided the liquid assets by awarding approximately 65 percent to the husband and 35 percent to the wife. These liquid assets include bank accounts, stock, an insurance policy, and a pension plan.
The house, which was valued at $230,000 and in both parties' names, was divided by giving 80 percent to the wife and 20 percent to the husband. The court awarded each party the car in his or her possession. The court also awarded the wife alimony of $225 per week for a four-year period in order to enable her to complete school. The wife was not awarded any support for the couple's adult child who still resides with the wife in the family domicile.
The first issue, that of the court's valuation of the marital domicile, may be summarily decided. When, as in the present case, two experts submit property appraisals and the justice chooses to average the two appraisals, no error results. As the wife's expert noted, real estate appraising is not an exact science. The trial justice may accept or reject testimony of the wife's expert witness and derive therefrom an independent appraisal. This the trial justice did.
The second issue we consider is that of the division of the marital domicile. We note at the outset that this court on review will not disturb the trial justice's ruling unless he or she overlooked or misconceived material evidence or was clearly wrong. Vanni v. Vanni, 535 A.2d 1268, 1271 (R.I. 1988). In dividing the marital assets, the court must conduct a three-step process. First, the trial justice must determine which of the parties' assets are marital property. Second, the trial justice must consider the factors enumerated in G.L. 1956 (1988 Reenactment) § 15-5-16.1. Third, he or she must distribute the marital property. Lancellotti v. Lancellotti, 481 A.2d 7, 10 (R.I. 1984).
One of two significant facts that the trial justice considered was that the marital domicile could not have been acquired without the financial assistance of the wife's father, Mr. Northup. Although § 15-5-16.1 provides that property acquired by one spouse as a gift is not subject to equitable distribution, the wife's father testified that the gifts had been given to both the husband and the wife. Moreover, this court has stated that property can be converted from nonmarital property into marital property if changed in form and put into joint names. See Quinn v. Quinn, 512 A.2d 848, 852 (R.I. 1986) (introducing the doctrine of transmutation as presuming property is marital property when in the name of both spouses). The marital home is therefore unquestionably marital property subject to fair and just assignment. See D'Agostino v. D'Agostino, 463 A.2d 200, 203 (R.I. 1983) (requiring a property division to be fair and just).
Another significant factor that may be considered is the conduct of the parties during the marriage. Section 15-5-16.1. The court stated that "[n]either party did anything that was so terrible that this Court could say that one party was `at fault' * * * in the breakup of this marriage." The record supports this additional finding of the trial justice.
A review of the evidence, however, clearly shows that the trial justice was wrong in distributing 80 percent of the equity in the marital domicile to the wife. Despite her finding that the wife's father's gifts to the *1133 couple were not given solely to the wife, the trial justice proceeded to divide the home by "reviewing the fact that the plaintiff's father made such substantial contributions in the acquisition of each of the homes that the parties had owned." Some modification is therefore necessary to achieve an equitable distribution of the assets.
The facts of this case indicate that only a slight modification of the trial justice's order is necessary. In the case of Casey v. Casey, 494 A.2d 80 (R.I. 1985), this court stated that a division of marital property need not be equal to be equitable. If the court were to divide the value of the marital domicile equally, this would not result in an equal division of the marital property. The husband's division would instead exceed the wife's in light of the division of the other marital assets. According to the trial justice's order, the wife does not receive 80 percent of the total assets but rather only approximately 65 percent. These figures do not consider the fact that the husband is entitled to keep his automobile (a 1986 Ford Thunderbird) that is estimated, according to the justice's decision, to be worth considerably more than the wife's automobile (a 1984 Subaru). The court also considered the division of property in declining to award the wife counsel fees. We find that equity requires that we consider the value of the husband's car and the value of the husband's liquid assets (which amount to nearly three times that of the wife's liquid assets). After considering these facts, we have determined that a distribution of 60 percent of the marital domicile to the wife and 40 percent to the husband is fair and equitable.
The final issue is that of alimony. According to § 15-5-16, the following factors may be considered in awarding alimony: the length of the marriage, the conduct of the parties during the marriage, the health, age, station, and occupation of each, the amount and source of their income, the vocational skills and employability of the parties, and the liabilities and needs of each of the parties. This court has stated that alimony is designed to provide support for an ex-spouse based on need. Fisk v. Fisk, 477 A.2d 956 (R.I. 1984). It should be payable for a limited and definite period and it should be reasonably calculated to allow the recipient to become financially independent. Stevenson v. Stevenson, 511 A.2d 961 (R.I. 1986).
In the instant case the trial justice determined that the income of the husband and the wife differed greatly. The net income of the wife was determined to be $207 per week, which contrasts significantly with the weekly income of the husband, which was determined to be $669. Moreover, it appears that the husband had established himself in a secure job as an executive at Digital Corporation whereas the wife was still pursuing a bachelor's degree. The trial justice was therefore correct in awarding the wife $225 per week for four years in order "specifically [to] allow her to get her bachelor's degree and become employed at a job so that her income will be approximately $20,000 a year." This award of alimony, which is limited to a four-year period, will help the wife to become financially independent and self sustaining.
In conclusion, the defendant's appeal is without merit except in regard to the division of the equity in the marital domicile. Accordingly the judgment is amended to allow the wife to receive 60 percent of the equity in the marital domicile, and the award of alimony is hereby affirmed. The case is remanded to the family court with instructions to amend the judgment to render it consistent with this opinion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543879/ | 55 B.R. 770 (1985)
In re James Ross HARTLEY, Sharon Lee Hartley, dba Hartley Trucking, Debtors.
Quentin M. DERRYBERRY, II, Trustee, Plaintiff,
v.
The PEOPLES BANKING COMPANY, Defendant.
Misc. No. 84-7014, Adv. No. 83-0748, Bankruptcy No. 81-01855.
United States Bankruptcy Court, N.D. Ohio, W.D.
April 15, 1985.
*771 Quentin M. Derryberry, II, Wapakoneta, Ohio, for trustee/plaintiff.
Mark Kreitman, Mark K. Thomas, Antonow & Fink, Chicago, Ill., for plaintiff.
Theodore M. Rowen, Kenneth J. White, Toledo, Ohio, for St. Joseph Bank.
Thomas Drake, William E. Clark, Findlay, Ohio, for defendant.
Reginald S. Jackson, Jr., Steven R. Smith, Toledo, Ohio, for Toledo Trust Co.
PROPOSED FINDINGS OF FACT, PROPOSED CONCLUSIONS OF LAW AND PROPOSED ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON COUNT 4 OF THE COMPLAINT
WALTER J. KRASNIEWSKI, Bankruptcy Judge.
This matter is before the court upon the Plaintiff/Trustee's motion for partial summary judgment on Count 4 of his 6 count complaint, to avoid preferential transfers pursuant to 11 U.S.C. 547(b), and upon the cross motion of the Defendant, Peoples Banking Company of McComb, (Peoples) for summary judgment of dismissal of said Count 4. The plaintiff in Count 4 of his complaint asks for judgment in the amount of $918,000 plus interest. However in the motion for partial summary judgment the request is for $500,000, which is the amount of a transfer from Midwest Emery Freight, Inc. to Peoples.
Peoples initially moved the District Court for an Order withdrawing reference. On February 9, 1984 the Honorable Nicholas J. Walinski, while finding that reference should be withdrawn, referred the entire proceeding to this Court with instructions specifying the court's powers and functions as follows: to schedule discovery, set dates for pretrial conferences, assist with possible settlement, hold pretrial conferences, enter an order placing the case on the District Court's trial calendar returning the case for trial, hear pretrial motions, and to submit proposed findings of fact, conclusions of law and a proposed order to the court for de novo review.
In accordance with Judge Walinski's mandate the undersigned hereby submits proposed findings of fact, proposed conclusions of law and a proposed order finding that the trustee has established that the receipt of $500,000 by Peoples Banking Company on June 10, 1981 constitutes a voidable preference pursuant to 11 U.S.C. § 547(b), and that, there being no genuine issue of material fact in dispute, plaintiff is entitled to partial summary judgment on Count 4 of his complaint as a matter of law.
STATEMENT OF FACTS
The Debtor, James Ross Hartley, (Hartley) individually owned and operated a business known as The Hartley Trucking Company from 1975 to August 1981. Hartley engaged in interstate hauling of freight from its main terminal in Carey, Ohio.
From November, 1979 through May, 1981, Hartley maintained checking accounts with the Defendant, Peoples. As the result of a series of transactions occurring prior to April 28, 1981 Hartley's account was in a substantial overdraft position. On April 28, 1981 bank examiners discovered that the account was then overdrawn by approximately $1,206,800. Separate attempts were made to cover the overdraft on April 30, and May 1, 1981. Both arrangements failed because checks tendered by Hartley were returned due to stop payments which had been placed on them.
On June 2, 1981, Hartley and representatives of Peoples and Midwest Emery Freight Systems, Inc. (Midwest Emery), who leased equipment from Hartley, and their respective counsel met for the purpose of providing payment for the 1.2 million dollar overdraft. That meeting resulted *772 in the execution by James Ross and Sharon Lee Hartley of the following documents:
(a) Agreement of Settlement
(b) $306,800 Cognovit Term Note
(c) Security Agreement
(d) Stock Pledge Agreement
(e) Open-End Mortgage and Security Agreements
Those agreements and documents provided, and the court finds as undisputed, the following facts:
Hartley was indebted to Peoples on a pre-petition debt in the amount of $1,206,800 as a result of incurring overdrafts on checking accounts maintained with the bank. The debtor agreed to pay Peoples $900,000 on the closing date of the settlement by wire transfer sent to Peoples' account at National City Bank, Cleveland, Ohio, Attention: James W. Aldrich, Vice President. Hartley further agreed to pay Peoples the sum of $306,800, as evidenced by the cognovit term note, in installments of $2,500 per week commencing June 9, 1981, $2,500 per week commencing August 29, 1981 and a final balloon payment on May 31, 1985.
Under the security agreement Hartley granted Peoples and Midwest Emery security interests in all equipment, accounts, contract rights, inventory and all other property then owned or thereafter acquired by Hartley.
Pursuant to the stock pledge agreement, on June 10, 1981 the debtor executed assignments of the stock, then owned by Hartley to Peoples as follows:
6,000 shares of stock in the Peoples Bank, Carey, Ohio;
1,000 shares of stock in Carey Freight Management, Inc.; and
1,000 shares of stock in Hartley Trucking, Inc.
Under the open-end mortgage and security agreements Peoples and Midwest Emery were granted mortgages upon all real property then owned by the debtor.
On June 10, 1981 pursuant to the June 2, 1981 agreement, Midwest Emery wire transferred $500,000 from a bank account in Chicago to Peoples' account at National City Bank in Cleveland, Ohio.
On September 8, 1981 the debtors filed a Chapter 7 petition in this Court seeking relief under the provisions of Title 11 of the United States Code. The trustee now seeks to avoid the $500,000 transfer as a preference pursuant to § 547(b).
This case presents three issues to be decided. First the court must determine if all the elements of a preference as specified by § 547(b) were established. Secondly the court considers the defendants contention that it was entitled to preserve the transaction under the exception provided in § 547(c)(2). The final issue is whether summary judgment, which both parties request, is appropriate under the facts and circumstances of this case.
DISCUSSION
The trustee seeks to recover a $500,000 payment made to the defendant bank by a third party to whom the debtor granted security interests in various property. The payment was made directly to the defendant to reduce an overdraft of 1.2 million dollars which had been incurred during the preceeding months and discovered by bank examiners on April 28, 1981. The payment was made 90 days prior to the filing of the debtors bankruptcy petition. Claiming that the payment qualifies as a preference under § 547(b), the trustee now seeks its recovery.
The trustee to prevail in a preference action must establish all elements set forth in Section 547(b). G.E. Grogan v. Southwest Textiles, Inc. (In re Advance Glove Mfg. Co.), 42 B.R. 489, 491 (Bankr.E.D. Mich.1984). The six elements of a preference are as follows:
(1) any transfer of property of the debtor;
(2) to or for the benefit of a creditor;
(3) for or on account of an antecedent debt owed by the debtor before such transfer was made;
*773 (4) made while the debtor was insolvent;
(5) made
(A) on or within 90 days before the date of the filing of the petition; or
(B) between 90 days and one year before the date of the filing of the petition, if such creditor, at the time of such transfer
(i) was an insider; and
(ii) had reasonable cause to believe the debtor was insolvent at the time of such transfer; and
(6) that enables such creditor to receive more than such creditor would receive if
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent provided by the provisions of this title.
The objective of the preference section of the Bankruptcy Code as stated in the House Report is to:
Facilitate the prime bankruptcy policy of equality of distribution among creditors of the debtor. Any creditor that received a greater payment than others of his class is required to disgorge so that all may share equally. The operation of the preference section to deter `The Race of Diligence' of creditors to dismember the debtor before bankruptcy furthers the goal of the preference section that of equality of distribution.
H.R.Rep. No. 595, 95th Cong. 1st Sess. 178 (1977). Reprinted in 1978 U.S.Code Cong. & Ad.News § 5787, 6138. Therefore the court must look to the effect of the transfer to assure equality of distribution.
TRANSFER OF PROPERTY OF THE DEBTOR
It is undisputed that $500,000 was transferred via wire by Midwest Emery to Peoples' account at a bank in Cleveland on June 10, 1981 to reduce the debtor's overdraft. Sending the money by wire is contemplated by the Code in its broad definition of transfer in § 101(48) which includes:
Every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with property or with an interest in property, including retention of title as a security interest and foreclosure of the debtor's equity of redemption.
The issue raised by the defendant concerning this element is not if a transfer occurred but whether the property transferred was the debtors.
Peoples contends that if the property transferred did not belong to the debtor there can be no preference because creditors would not be injured as there was no reduction of the assets available to them. In support of this proposition, the defendant argues that: 1.) the $500,000 was the money of Midwest Emery and not the Hartleys; 2.) the money neither came from nor was transferred to an account in which the Hartleys had any interest or control; and 3.) was transferred directly from Midwest Emery to the defendant's bank account. Essentially Peoples relies on the "earmarked rule" as stated in Genova v. Rivera Funeral Home (In re Castillo), 39 B.R. 45 (Bankr.D.Colo.1984).
The court in Castillo stated:
The first element of a preferential transfer as set forth in section 547(b) requires that there be a transfer of property of the debtor. As a general rule, Colliers states that when a third person makes a loan to the debtor specifically to enable him to satisfy the claim of a designated creditor, the proceeds never become part of the debtor's assets, and therefore, no preference is created. 4 Colliers on Bankruptcy § 547.25 at 547-94 (15th ed. 1983). Colliers continues to state that the rule is the same regardless of whether the proceeds of the loan are transferred directly by the lender to the creditor or are paid to the debtor with the understanding that they will be paid to the creditor in satisfaction of his claim, so long as such proceeds are clearly `ear-marked.' Supra, at 547-94 and 95. *774 Id. at 46. At first blush that reasoning makes sense because the debtor has not given anything away in that situation. Assuming that the creditors were on equal status it is merely a substitution. However, Collier on Bankruptcy discussing transfers by indirection goes on to say:
Thus, no preference is created when the parent corporation of an insolvent debtor gives the debtor funds on condition that they be used to pay a specified creditor, and they are in fact so employed. In such case, the parent in controlling the transaction and the funds never become part of the debtor's assets. Similarly, where the parent corporation gives the debtor funds on condition that they be used to pay certain creditors, but instead they are returned to the parent, the return to the parent is not a preference since the funds never become a part of the debtor's estate. The result in each case would be different if the debtor controlled the transaction, or received the funds free of any condition regarding their use. Also, a preference would be created if the parent paid the debts of the debtor directly, but took from the debtor security good as between parent and debtor (even though voidable by the trustee.) In such case, the money paid by the parent corporation is the consideration for the security given to it previously by the debtor, and the money is part of the debtor's assets. (emphasis added)
4 Collier on Bankruptcy § 547.09 p. 547-41 (15th ed. 1985) n. 1979.
The defendant in In re Villars, 35 B.R. 868 (Bankr.S.D.Ohio 1983) cited Collier on the "earmark rule". The court held that the parties should not place "undue emphasis" on whether the funds were "earmarked" and then told them to direct their attention to the "effect" of the transfer. In the present matter the debtor as consideration for the $500,000 loan granted security interests in personal property, stock and parcels of real property as evidenced by the June 2, 1981 agreements. The effect of these agreements was to substitute a secured creditor for a previously unsecured creditor. In Steel Structures Inc. v. Star Mfg. Co., 466 F.2d 207 (6th Cir.1972) and In re Villars, supra the courts held that where an unsecured debt is exchanged for a secured debt the transfer results in a preference thus verifying that the debtor made a transfer of his property. Considering that Peoples received $500,000 on an unsecured debt and that Midwest Emery made the loan only after receiving security interests, the court finds there was a transfer of the debtor's property.
TRANSFER TO OR FOR THE BENEFIT OF A CREDITOR
The defendant has not denied that it was a creditor of Mr. Hartley or that it received the $500,000 payment to reduce its 1.2 million dollar overdraft. Section 101(9) of the Bankruptcy Code defines a creditor as an entity that has a claim against the debtor's estate. Section 101(4) of the Code defines a claim as a right to payment, whether or not the right is contingent. The court therefore finds that in light of the fact that Hartley owed Peoples 1.2 million dollars as a result of an overdraft the wire transfer of money to the defendant's bank was for the benefit of a creditor.
FOR OR ON ACCOUNT OF AN ANTECEDENT DEBT
The defendant does not dispute that the proceeds from the loan were paid on an antecedent debt. Instead the defendant contends that to be a preference there must be a diminution or depletion of the estate which it argues did not happen in this case.
The defendant in its own brief refers to cases which hold that if the third party advances funds to the unsecured transferee and then receives a security interest in property of the debtor in return, the unsecured creditors have been harmed because of the substitution of a secured debt for a previously unsecured debt. Those facts are identical to the situation in this case. Yet the defendant insists that the plaintiff has a duty to prove depletion of *775 the estate regardless of the fact it is not an element of the Code. The defendant extends its argument to the point that even if the plaintiff is able to prove depletion, he then must establish the value of the assets surrendered and further asserts that the value should be taken at the time of liquidation. The defendant is not alone in relying on the confusing cases and comments which have adopted, interpreted and twisted this judicial gloss.
As a starting point to illustrate the confusion which surrounds the use of the "depletion test," the court need look no further than 4 Collier on Bankruptcy (15th ed. 1985) which at § 547.20 p. 547-75 states:
Proving depletion of the estate is not a necessary element to establish a preference under section 547.
However Collier then seems to espouse the opposite opinion at § 547.21 p. 547-85 which provides under the heading "Diminution of the Estate is Essential" that:
Although transferee no longer need have reasonable cause to believe the debtor is insolvent, the Bankruptcy Code does not avoid every transfer of property made by the debtor within 90 days of bankruptcy, but only those preferential transfers that result in a depletion of the debtor's estate and that do not fall within one of the exceptions listed in section 547(c). That is implicit in the very nature of a preference as a transfer of assets available to creditors that results in favoring the transferee over other similar creditors who may share in the distribution. It may also be implied from the phrase `for or on account of an antecedent debt,' carried over in section 547(b)(2) from the 1938 Act. (Footnotes omitted)
On the other hand within that same section Collier states that:
The analysis concerning diminution of the estate is a convenient method for courts incapable of coping with the statutorily specified elements to reach just results. Counsel should refrain from arguing `diminution of the estate' except as a last resort. The analysis in every case should be explained in terms of the requirements of the Code rather than by a judicially created short cut.
at Vol. 4, § 547.21 p. 547-91 n. 10 (15th ed. 1985)
Of course it is unfair to Collier to present these sections out of context but it does illustrate that on the surface this appears to be a legal muddle.
The case of Deel Rent-A-Car, Inc. v. Levine, 721 F.2d 750 (11th Cir.1983), which ruled that the diminution of the estate doctrine is not applicable when a debtor sues to avoid a preference under § 522(h), provides a well documented history of the doctrine. The court concluded that courts have generally applied the doctrine in cases where the creditor received an asset that, for some reason, is protected from the claims of other creditors. This application makes sense because it would be a meaningless effort to bring the funds back into the estate only to have the creditor assert an exemption that would allow him to retain them. The doctrine has also been used when a third party is involved. For example, where the debtor was a company and an officer paid a creditor with personal funds it was held that since there was no diminution of the estate there was no preference. Brown v. First National Bank of Little Rock, Arkansas, 748 F.2d 490 (8th Cir.1984). Also where there was an equal and contemporaneous benefit exchanged for the transfer, the doctrine was applied to determine if other creditors had been harmed. While the depletion of the estate doctrine may have evolved as an equitable power of the court, "as an equitable doctrine its application, of necessity, must comport to and remain compatable with the prevailing legislative intent." Waldschmidt v. Ranier (In re Fulghum Construction Corporation) 706 F.2d 171, 173 (6th Cir.1983). Thus while it may be useful to demonstrate that property transferred was not the debtor's it cannot be used as an extra test to be applied after the elements of a preference have been proven. This Court agrees with Collier supra at p. *776 547-91 that every case should be explained in terms of the requirements of the Code.
In this case Hartley by increasing the secured debts obtained a $500,000 loan to pay an antecedent debt to a creditor which amounts to a preference if the remaining elements are proven. However Peoples urges the court to create an element or a test not found in the Code to defeat the trustee's claim.
The bank contends that the court should consider that all of the property which the debtor granted security interest was already mortgaged far beyond its value. As proof of the worthlessness of those security interests the bank provided figures showing that none of the prior lienholders were satisfied when the property was liquidated after bankruptcy. While this court finds that such an analysis has no basis in the Code and that the suggested valuation method is erroneous it recognizes that this argument was gleaned from the case of Virginia National Bank v. Woodson (In re Becker), 329 F.2d 836 (4th Cir.1964).
In Woodson the debtor transferred shares in a community swimming pool in consideration for $8,000. All of the elements of a preference under the Act were met but the bank argued that the estate was not depleted by the transfer since the property had no value. The Court held that if the shares had value it was clearly a preference but there was no evidence in the record which established value and therefore the case was remanded to determine that question. It would be accurate to find that Woodson is limited to those particular circumstances where a sweet and honest sister as opposed to an agressive angry creditor takes security for a loan. It however is more convenient to distinguish this case as being under the Act. Whichever reason is acceptable, it is clear that requiring the trustee to prove the value of the transferred property is an erroneous procedure under the Code.
The most obvious reason Woodson is inapplicable is that when all the elements of a preference have been met the only way to preserve the transaction is through one of the exceptions specified in the Code, not by judicial gloss. A practical reason for denying this test would be to avoid a battle of the experts trying to determine the "true" value of the property. The defendants as in this case would argue that the value should be determined when liquidated, while the plaintiffs would assert the valuation should be at the time of the transfer. Either way all the parties would argue about the "true" value of property. However any such deviation from the Code is unnecessary.
Following the Code which avoids questioning the value of transferred property after the fact, this court finds the transferred property is worth at least what it was exchanged for. "A transfer of property includes anything of value which has debt paying or debt securing power". 4 Collier on Bankruptcy at § 547.08 p. 547-38 (15th ed. 1985). Here the debtor gave security interests to obtain a $500,000 loan which enabled it to pay a creditor. Those security interests were worth at least $500,000, therefore the transfer was taking value from the estate and transferring it for the benefit of an unsecured creditor on an antecedent debt.
THAT ENABLES THE CREDITOR TO RECEIVE MORE THAN HE WOULD UNDER CHAPTER 7
The focus of the court must be on the effect of the payment, Erman v. Armco (In re Formed Tubes, Inc.), 41 B.R. 819 (Bankr.E.D.Mich.1984); In re Villars, 35 B.R. 868 (Bankr.S.D.Ohio 1983). A comparison must be made between what the bank would have been able to recover as a member of the class of unsecured creditors and what it received as a result of the transfer. The defendant has offered evidence that establishes the secured creditors will not receive anything near complete payment so it is apparent that unsecured creditors will receive nothing. The bank held an unsecured debt against the debtor and the payment to it allowed it to obtain a greater percentage of its debt than other creditors of the same class. Therefore the *777 payment cannot be validated. Steel Structures, Inc. v. Star Manufacturing Company, 466 F.2d 207 (6th Cir.1972).
The defendant maintains that possibly due to pending litigation the estate could be enlarged to permit a 100% distribution to creditors. To accept this argument "would make it impossible for a trustee to recover any transfer as a preference." Belfance v. BancOhio National Bank (In re Gastaldo), 13 B.R. 808, 810 (Bankr.N.D.Ohio 1981). Moreover even if additional assets were recovered, the defendant would not be prejudiced, since it would be able to share pro-rata in the dividends received with other creditors of the same class. In re Advance Glove Mfg. Co., supra; In re Gastaldo, supra; In re Brent Exporations, 31 B.R. 745 (Bankr.D. Colo.1983).
MADE WHILE THE DEBTOR WAS INSOLVENT
Section 547(f) of the Code provides the trustee with a statutory presumption that the debtor was insolvent on and during the 90 days immediately preceding the date of the filing of the bankruptcy petition. The defendant has not disputed the trustee's evidence that the debtors were insolvent.
Failure to rebut the presumption was enough for the court in Rajala v. Bowlus School Supply (In re Kirk), 38 B.R. 257 (Bankr.D.Kan.1984) to find the debtor insolvent. Likewise in Clay v. Traders Bank (In re Briarbrook Development Corporation), 11 B.R. 515, 519 (Bankr.W. D.Mo.1981) the court stated "Thus in the absence of any evidence on the issue of insolvency, the trustee must prevail."
Similarly in Villars supra the court was faced with a defendant who did not introduce any evidence of solvency. The court considered the evidence put forth by the trustee but in addition stated:
The crucial fact in support of the Trustee's burden of proof, nevertheless, is the presumption of insolvency during the ninety days immediately prior to the filing of the bankruptcy petition. 11 U.S.C. § 547(f). This presumption must be applied pursuant to Rule 301 of the Federal Rules of Evidence. It does not shift the ultimate burden of proof on the question of insolvency, but it does require the Defendant to come forward with `some evidence' to rebut the presumption. HR Rept. No. 95-595, 95th Cong. p. 375, Bkr-L Ed. Legislative History § 82:11. No competent evidence whatever was submitted by Defendant as to the valuation of the Debtors' assets or as to the amount of creditors' claims. Rule 301 shifts the burden of producing evidence, not the burden of persuasion. The Defendant in producing no competent evidence as to solvency does not even meet the minimum test of the `bursting bubble' theory, which the legislative history negates.
At 873. Furthermore the Court in In re Independent Clearing House Co., 41 B.R. 985 (Bankr.D.Utah 1984) held:
The presumption of insolvency is governed by the standards of Rule 301 of the Federal Rules of Evidence, which places the ultimate burden of proof on the issue of insolvency on the trustee, but does not require him to present evidence on this issue unless the defendant creditor first comes forward with some evidence to rebut the presumption. H.R. Rep. No. 95-595, 95th Cong., 1st Sess. 375 (1977), 1978 U.S.Code Cong. & Admin.News, p. 6331; S.Rep. No. 95-989, 95th Cong.2d Sess. 89 (1978), 1978 U.S. Code Cong. & Admin.News, p. 5875; In re Thomas Farm Systems, Inc., supra, 18 B.R. [543] at 544 [Bkrtcy.E.D.Pa. 1982)]; In re Butler, 3 B.R. 182, 185-86, 6 B.C.D. 32, 1 C.B.C.2d 533 (Bkrtcy.E.D. Tenn.1980)
at 1011.
In support of the motion for partial summary judgment plaintiff refers to Exhibit A of the complaint which contains Financial Statements of the debtor, showing total assets of $825,969.26 and total liabilities of $2,122,272.82 as of December 31, 1980. On June 2, 1981 the debtors' liabilities increased by at least $806,800, the amount of *778 the notes executed in favor of Midwest Emery and Peoples. The trustee's assertion meets the definition of insolvency provided by 11 U.S.C. § 101(26) which states:
`insolvency' means
(A) with reference to an entity other than a partnership, financial condition such that the sum of such entity's debts is greater than all of such entity's property at a fair valuation . . .
Since the defendant has not offered any evidence to rebut the presumption or the allegations made by the trustee the court must find the debtor insolvent at the time of the transfer.
MADE WITHIN 90 DAYS OF BANKRUPTCY
The $500,000 transfer was received by the defendant on June 10, 1981. The debtor filed its voluntary bankruptcy for relief on September 8, 1981. The bank received the funds on June 10, 1981. Regardless of whether the day of the filing or transfer is excluded, both methods of computation result in the transfer being made on or within 90 days of insolvency. With all six elements of a preference having been proven by the trustee in this case the only way for the defendant to preserve the transaction is to qualify under one of the exceptions of § 547(c).
§ 547(c)(2) DEFENSE FOR PAYMENTS MADE IN THE ORDINARY COURSE OF BUSINESS
Peoples argues that if the court finds that the elements of a preference are present then the payment is protected under Section 547(c)(2) which provides that:
(c) The trustee may not avoid under this section a transfer
(2) to the extent that such transfer was
(A) in payment of a debt incurred in the ordinary course of business or financial affairs of the debtor and the transferee;
(B) made not later than 45 days after such debt was incurred;
(C) made in the ordinary course of business or financial affairs of the debtor and the transferee; and
(D) made according to ordinary business terms;
In support of its position Peoples cites Butz v. BancOhio National Bank, 31 B.R. 893 (Bankr.S.D.Ohio 1983). In Butz the court found that payments made to cover overdrafts within 45 days after the debt was incurred were in the ordinary course of business and were thus excepted from the trustee's avoidance power. However Peoples seems to have overlooked the fact that the defendant in Butz had entered into a line of credit agreement where the bank agreed to honor overdrafts thereby making the payments to the bank routine according to the agreement. No such agreement exists in this case and there is no evidence to indicate the payments agreed upon at the June 2, 1981 meeting were in the ordinary course of business. The defendant's request for leave to demonstrate to the court how much of the debt was incurred within 45 days need not be considered because the defendant has failed to bear the burden of proving each of the four elements of the § 547(c)(2) exception. In re Richter v. Phillips Jewelers & Distributors, Inc., 31 B.R. 512, 515 (Bankr.S.D.Ohio 1983).
In summary and for all of the reasons stated above the court finds that the $500,000 was obtained in exchange for the debtors' property and transferred to Peoples within 90 days of the debtors' bankruptcy petition, for the benefit of a creditor on an antecedent debt, while the debtor was insolvent, which qualifies as a preference to be avoided under § 547(b) and not excepted under any defense.
SUMMARY JUDGMENT
When a party seeks summary judgment the court's actions are guided by the fact it is an extreme remedy that should be awarded cautiously. St. Paul Mercury Insurance Co. v. Huitt, 215 F.Supp. 709, 713 (W.D.Mich.1963), rev'd. on other grounds, 336 F.2d 37 (6th Cir.1964). Therefore, the court must carefully examine all of the *779 documents on file to ascertain if a genuine issue of material fact exists. If there is none, it must apply the law to the facts and render judgment.
Pleadings and documentary evidence must be liberally construed in favor of the party opposing the motion. Board of Ed., Cincinnati v. Department of H.E.W., 532 F.2d 1070, 1071 (6th Cir.1976). Furthermore summary judgment must be denied unless the moving party demonstrates his entitlement to it beyond a reasonable doubt. 10A Wright & Miller, Federal Practice and Procedure § 2727 at p. 121 (1983). The burden on the party opposing summary judgment is not a heavy one; he simply is required to show specific facts as opposed to general allegations that present a genuine issue for trial. However "when the record is without contradiction or leads to but one conclusion, summary judgment is proper" Board of Cty. Rd. Com'rs., etc., Mich. v. American Air, Inc., 369 F.Supp. 698, 702 (E.D.Mich.1974).
Peoples has not raised a genuine issue of material fact. The thrust of its attack on any factual matters goes to the question of whether James Hartley is the true debtor. Peoples base this proposition on a reading of plaintiff's amended complaint filed in case number 83 C 6267 which is pending in the United States District Court for the Northern District of Illinois, Eastern Division. The plaintiff urges that Peoples be estopped from disputing the fact that the Hartleys are the debtors because in several adversary complaints filed by the defendant it has alleged that the Hartleys are the debtors.
The amended complaint in question concerns an action filed against Milton D. Ratner and various companies under his control. While that complaint makes numerous allegations concerning Mr. Ratner, it does not allege that he is the true debtor. Paragraph 5 of the amended complaint identifies the Hartleys as the debtors while paragraphs 7-13 describe various defendants, none of whom is described as being the debtor. Peoples confusion must stem from the fact that the amended complaint alleges that the debtors were agents of certain principals and that those principals are liable for the debts of their agents.
The mere allegation that the Hartleys were agents does not vitiate their personal bankruptcy proceeding. In light of Peoples' misunderstanding of the plaintiff's allegation, this Court finds there is no genuine issue of material fact concerning the identity of the debtors in this case. The court further finds that James Ross and Sharon Lee Hartley are the debtors in this case and the court has jurisdiction over their case.
Another issue raised by the parties pertains to the testimony of Mr. Marvin Lourie who represented the interests of Midwest Emery in making the loan to the Hartleys. The plaintiff has submitted testimony of Mr. Lourie taken by deposition on June 2, 1981 to provide additional support for his assertion that the $500,000 was property of the debtor used to pay an antecedent debt to a creditor. There is no dispute that Midwest Emery wired $500,000 to be paid on the Hartley overdraft. However, the defendant took issue with the statement by Mr. Lourie in that deposition which provides:
Q. The agreement was for Midwest Emery to actually pay $500,000 to McComb Bank, isn't that correct?
A. To transmit some of Hartley's funds. There was no agreement for Midwest Emery to pay the McComb Bank out of its funds.
Lourie Deposition p. 86.
While People's counsel was present at Mr. Lourie's deposition, he did not clarify or oppose the above statement. Instead, defense counsel has submitted an affidavit of Mr. Lourie which was taken of course without the benefit of cross examination by the plaintiff. This affidavit continues to state that Midwest made a secured loan to Hartley to pay his overdraft at the McComb Bank. The only change is that instead of saying "some of Hartley's funds" were transferred, he was careful to state the $500,000 was not money earned *780 by Hartley nor did it represent money owed to Hartley by Midwest Emery.
The plaintiff filed a motion to strike the affidavit of Mr. Lourie citing Bahamas Agricultural Industries Limited v. Riley Stoker Corporation, 526 F.2d 1174, 1181 (6th Cir.1975) and Cordle v. Allied Chemical Corporation, 309 F.2d 821 (6th Cir. 1962) as supporting the inadmissibility of an affidavit which conflicts with a prior deposition at which opposing counsel had the opportunity to object to the material in question. On the other hand, in opposition to striking the affidavit, the defendant cites Guarantee Insurance Agency Company v. Mid-Continental Realty Corporation, 57 F.R.D. 555, 563 (1972) and 6 Moore, Federal Practice, 2nd Ed. 56:22[1] which provides:
The deposition of a witness will usually be more reliable than his affidavit, since the deponent was either cross-examined by opposing counsel, or at least available to opposing counsel for cross-examination. Nevertheless if a witness has made an affidavit and his deposition has also been taken or he has made two affidavits, and the two in some way conflict, the court may not exclude the affidavit from consideration in the determination of the question whether there is any genuine issue as to any material fact.
at XX-XXXX-XXXX.
F.R.C.P. 56(c) expressly provides tht the court may make use of depositions on a summary judgment motion, United States v. Leland Door Company, 243 F.Supp. 918 (E.D.Mich.1965). In this matter the court follows the ruling in Bender v. Southland Corporation, 749 F.2d 1205, 1211 (6th Cir. 1984) where the Sixth Circuit Court of Appeals noted that the defendant cited Reisner v. General Motors, Corp., 671 F.2d 91, 93 (2d Cir.) cert. denied, 459 U.S. 858, 103 S.Ct. 130, 74 L.Ed.2d 112 (1982) and Radobenko v. Automated Equipment Corp., 520 F.2d 540, 544 (9th Cir.1975) requesting it to ignore the rule that the plaintiffs may not attempt to raise genuine issues of material fact by filing affidavits that contradict their previous deposition testimony. Without ruling on the correctness of that position the court allowed the affidavits on the grounds that they did not contradict the depositions. This Court believes that documents signed on June 2, 1981 speak for themselves and the testimony of Mr. Lourie while supportive is not dispositive. Considering Mr. Lourie's testimony in both the deposition and the affidavit it is clear that money was wired to the defendant on account of an antecedent debt after receiving security and that the transaction was a loan. Neither party disputes these facts. Therefore the court finds the affidavit does not contradict the deposition and it will be accepted. In light of the foregoing, the plaintiff's motion to strike the affidavit of Marvin Lourie should be denied. The court further finds that this testimony does not raise a genuine issue of material fact.
Considering the record in this case and applying the foregoing principles, the court determines there are no material factual issues in dispute. The only factual dispute raised by the defendant concerned the identity of the debtors and that claim did not raise a genuine issue since at all times the Hartleys have been listed as the debtors in this action. Therefore the court finds that summary judgment in favor of plaintiff is appropriate.
CONCLUSION
This matter was transferred to the District Court upon the defendant's motion to withdraw reference. The District Court granted the motion and instructed this Court to submit a proposed order concerning the matters which are "clearly part of the traditional, non-peripheral work of the Bankruptcy Court."
Following the District Court's order this Court submits this proposed order granting plaintiff partial summary judgment on Count 4 of the complaint. However, in light of the District Court's order withdrawing reference and its recent memorandum and order in Michigan Milk Producers Association v. Hunter, 46 B.R. 214 (Bankr.D.C.Ohio 1985), this Court should decline to hear the remaining five counts of *781 plaintiff's complaint. Judge Walinski in Michigan Milk Producers stated: "[T]his record supports an affirmative determination that resolution of the instant adversary proceeding would require consideration of both Title 11 and non-bankruptcy federal statutes regulating organizations or activities affecting interstate commerce. Withdrawal of reference is, therefore, mandatory under 28 U.S.C. § 157(d)." This Court believes Counts 1, 2, and 3, alleging causes of action under bankruptcy law are so inextricably linked to Count 5, alleging a civil conspiracy to defraud creditors, and to Count 6, which requires substantial and material consideration of anti-racketering statutes, 18 U.S.C. §§ 1341, 1344, 1961(1) and (5) and 1962(a), (c) and (d) to resolve the issues, that withdrawal of reference is appropriate.
In accord with the mandate of the District Court the undersigned recommends the adoption of the foregoing proposed findings of fact, proposed conclusions of law, and the following proposed Order:
ORDERED that plaintiff be, and he hereby is, granted partial summary judgment on Count 4 of his complaint. It is further,
ORDERED that plaintiff have judgment against defendant in the amount of $500,000.00. It is further,
ORDERED that the cross motion for summary judgment be, and it hereby is, denied. It is further,
ORDERED that the motion of the plaintiff to strike the affidavit of Marvin Lourie be, and it hereby is, overruled. It is further,
ORDERED that reference of this proceeding to the Bankruptcy Judge be, and it hereby is, withdrawn. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543880/ | 81 Md. App. 164 (1989)
567 A.2d 154
BETTY L. PRIDDY
v.
JACK G. JONES.
No. 498, September Term, 1989.
Court of Special Appeals of Maryland.
December 22, 1989.
Certiorari Denied March 9, 1990.
William T. Wood and John L. Dowling, Rockville, for appellant.
Paul V. McCormick and Sheila J. McLaughlin, Rockville, for appellee.
Submitted before GARRITY, KARWACKI and ROBERT M. BELL, JJ.
GARRITY, Judge.
The appellant, Betty L. Priddy, appeals an order of the Circuit Court for Montgomery County (Beard, J.) granting appellee Jack G. Jones's Motion to Dismiss her amended complaint. She presents the following issues for our determination:
I. Whether the circuit court erred in ruling that it lacked subject matter jurisdiction over her first amended complaint;
II. Whether she filed her second amended complaint within the applicable limitations period;
III. Whether the circuit court erred in granting the appellee's Motion to Dismiss on grounds that her amended complaint is barred by the doctrine of res judicata; and
IV. Whether her complaint is barred by the doctrine of collateral estoppel.
Because we hold the appellant's amended complaint was barred by limitations, we shall affirm the circuit court's ruling without need to discuss the remaining issues.
Factual Background
On March 16, 1981, the appellant was injured when she allegedly slipped and fell on a marble floor of the lobby in the building where she worked, then owned by the appellee. As a result of her injuries, the appellant filed a declaration in the Circuit Court for Montgomery County on March 1, 1984. The complaint sounded in negligence, and among her allegations the appellant claimed the following:
On the date of the incident described herein the defendant, Jack B. Jones, knew and should have known that the floor was wet and slippery. That the defendant, Jack B. Jones, by and through his agent, servants and employees, left the marble-tile floor uncovered and unclean for a substantial period of time, knowing of the condition described above. That the defendant, Jack Jones, by and through his agents, servants and employees, failed to make any attempt to cover and clean up said dangerous condition or to warn the plaintiff or other business invitees of the dangerous condition of the hallway floor.
On March 28, 1988 the Circuit Court for Montgomery County (Cave, J.) granted the appellee's Motion for Summary Judgment, a ruling we affirmed in Priddy v. Jones, No. 605, September Term, 1988 (Md. App., filed December 28, 1988) (unreported).[1] Our mandate in that case was issued on January 27, 1989.
On January 23, 1989, the appellant, through different counsel, filed an "Amended Complaint" under the same case number as the original. That amended complaint added the theory of negligent construction to her prior claim of negligent maintenance. Specifically, it alleged:
That on the date of the incident described herein the defendant, Jack B. Jones, knew and should have known that the marble/tile floor was inherently slippery and defective and that it failed to meet applicable safety standards. That the defendant, Jack B. Jones, by and through his agent, servants and employees, left the marble/tile floor uncorrected, uncovered and uncleaned for a substantial period of time, knowing of the conditions described above. The defendant, Jack B. Jones, by and through his agents, servants and employees, failed to make any attempt to cover and correct said dangerous condition or to warn the plaintiff or other tenants or business invitees of the dangerous condition of the said floor.
* * * * * *
That the defendant, Jack B. Jones, had a duty to construct and maintain said premises in a safe condition for a person working in the building, including the plaintiff, Betty L. Priddy; that the defendant, Jack B. Jones, knew, or in the exercise of due care, should have known the floor surface was inherently dangerous and failed to meet minimum safety standards and that the accumulation of water on the tile/marble floor worsened the said dangerous condition; that the defendant, Jack B. Jones, negligently and carelessly failed to correct the defective hallway floor and failed to place rubber mats or other adequate protection on said marble/tile floor, when the defendant, Jack B. Jones, knew or should have known that the said floor was slippery and dangerous.[2]
Apparently because it was initially filed four days prior to our mandate in the first Priddy decision, the appellant refiled the same amended complaint, entitled "Second Amended Complaint" on February 27, 1989.
The appellee filed a motion to dismiss, or in the alternative, to strike the appellant's amended complaints, arguing that the court lacked subject matter jurisdiction over the first amended complaint and that the second amended complaint was barred by res judicata, collateral estoppel, and limitations. Following a hearing, the circuit court (Beard, J.) granted the appellee's motion, ruling that it had no subject matter jurisdiction over the appellant's amended complaint of January 23, 1989 and that her second amended complaint filed February 27, 1989 was barred by limitations.
I. Jurisdiction
The lower court determined that it lacked subject matter jurisdiction over the January 23 amended complaint. The appellant refiled the identical amended complaint after the issuance of our mandate, however, thereby superseding the earlier complaint. It is well settled that an amended complaint complete in itself, without reference to the complaint that preceded it, replaces an earlier complaint in its entirety, and the earlier complaint is regarded as withdrawn or abandoned. Shapiro v. Sherwood, 254 Md. 235, 238-39, 254 A.2d 357 (1969); Villarreal v. Glacken, 63 Md. App. 114, 125, 492 A.2d 328 (1985). The issue of whether the court had subject matter jurisdiction over the complaint filed on January 23, 1989, is therefore moot. Our inquiry, then, is whether the second amended complaint is barred by the applicable statute of limitations.
II. Statute of Limitations
The appellant was required to file her action within three years from the date of the accident. Md. Ann. Code Cts. & Jud.Proc. art., § 5-101 (1984 Repl.Vol., 1989 Cum.Supp). The accident in which the appellant was involved occurred on March 16, 1981. The appellant filed her original declaration on March 1, 1984; that complaint was, therefore, clearly within the limitations period. Her second amended complaint was filed on February 27, 1989. Thus, it can only be within the limitations period if it "relates back" to the filing of the original.
In University Nursing Home v. Brown and Associates, 67 Md. App. 48, 55, 506 A.2d 268 (1986), Judge Bishop, citing Crowe v. Houseworth, 272 Md. 481, 485, 325 A.2d 592 (1974), observed on our behalf:
Where the operative factual situation set out in a timely filed preceding declaration remains essentially the same after amendment, the doctrine of relation back may be applied to bring the amended declaration within the limitations period. This is so even if a different cause of action is pled in a subsequent declaration. The Court of Appeals in Crowe presented the modern view: "so long as the operative factual situation remains essentially the same, no new cause of action is stated by a declaration framed in a new theory or involving different legal principles." (citations omitted).
In other words, merely changing the legal theory does not constitute a new and different cause of action for purposes of the statute of limitations; the material operative facts, not the legal theory, determine the cause of action. Kirgan v. Parks, 60 Md. App. 1, 15, 478 A.2d 713 (1984).
The appellant's cause of action set forth in her amended complaint (negligence of the appellee in installing an inherently slippery floor) relies on operative facts distinct from those involved in supporting her claims contained in the original declaration. The relevant facts involved in proving the appellant's initial claim of negligent maintenance were those bearing on the existence of unsafe, extrinsic matter on the floor; the claim required additional proof (as we established in our first opinion in this matter) that the appellee was in possession of the premises in order to show he knew or should have known of the dangerous condition. The appellant's amended theory of negligent construction, however, involved facts bearing on the floor's inherent safeness, its co-efficient of friction in relation to applicable safety standards, for example, and the appellee's installation of it. Whether the appellee was in possession of the premises at the time of the accident is not crucial to the second claim. Because the operative facts of the amended complaint are different from those implicated in the original declaration, the amended complaint does not relate back to the date of the original declaration.
Furthermore, and more fundamental, the relation back doctrine is simply not applicable to this case. By the time the appellant filed her February 27 amended complaint, a final judgment had already been rendered disposing of her original complaint. There was, therefore, nothing left to which her amendment could "relate back." The appellant was, then, effectively filing a new complaint for negligence approximately eight years after the accident for which she seeks redress occurred. Her amended complaint is therefore barred by the applicable limitations provision contained in § 5-101 of the Courts Article.
Conclusion
Accordingly, as the appellant's February 27, 1989, amended complaint was barred by the applicable statute of limitations, we shall affirm the circuit court's dismissal of that complaint.
JUDGMENT AFFIRMED; COSTS TO BE PAID BY APPELLANT.
NOTES
[1] We held that because the appellee leased the building in question to a tenant (Tractor, Inc.) for its "full, exclusive and unrestricted use," the appellee owed no duty of care to the appellant sufficient to support her negligence claim against him. We agreed with Judge Cave that the "[appellee] is not in possession, and accordingly, he has no duty to the plaintiff in this case to warn or come in and change the floor. The maintaining of the condition that she [appellant] complains of and the requirement that she enter through that door, rests in Tractor." In so holding, we relied on Rowley v. City of Baltimore, 305 Md. 456, 464, 505 A.2d 494 (1986).
[2] The record indicates that the appellant first raised the allegation of negligent construction in her opposition to the appellee's Motion for Summary Judgment. In our first opinion in this matter, however, we noted that the appellant had not alleged the same in her declaration, and that only the issues as framed in the pleadings were relevant for purposes of our reviewing the summary judgment disposition. We, therefore, did not address the appellant's negligent construction claim. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543580/ | 997 A.2d 789 (2010)
NAJAFI
v.
MVA.
Pet. Docket No. 49.
Court of Appeals of Maryland.
Granted June 9, 2010.
Petition for writ of certiorari granted. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543568/ | 105 F.2d 246 (1939)
INLAND STEEL CO.
v.
NATIONAL LABOR RELATIONS BOARD.
No. 6837.
Circuit Court of Appeals, Seventh Circuit.
June 21, 1939.
*247 Robert B. Watts, of Washington, D. C., for Labor Board.
Ernest S. Ballard, of Chicago, Ill., for Inland Steel Co.
Before SPARKS, MAJOR, and TREANOR, Circuit Judges.
MAJOR, Circuit Judge.
On January 4, 1939, Inland Steel Company filed herein its petition to review and set aside a certain order of the National Labor Relations Board issued November 12, 1938, in a proceeding against said company, appearing upon the docket of respondent as Case No. C-252, In the Matter of Inland Steel Company and Steel Workers Organizing Committee and Amalgamated Association of Iron, Steel and Tin Workers of North America, Lodge Nos. 64, 1010, and 1101. February 7, 1939, respondent filed its answer to such petition for review and request for enforcement of its order against the petitioner.
The matter with which we are presently concerned arises by reason of objections made to certain interrogatories, propounded to the Board and members thereof, purportedly pursuant to Rule 33 of the Federal Rules of Civil Procedure. Such interrogatories were served upon respondent by mail on March 2, 1939. The objections of respondent were served upon petitioner's attorneys on March 13, 1939, and were filed with this court the following day, together with notice and motion for hearing thereon.
A certified transcript of the record of the proceedings before respondent was filed in this court February 6, 1939. The facts as therein disclosed, culminating in the issuance of respondent's decision and order of November 12, 1938, are now material only to the extent of their pertinency to the interrogatories propounded by petitioner and respondent's objections thereto.
The proceedings before respondent were initiated against petitioner on June 12, 1937, pursuant to Section 10(b) of the National Labor Relations Act, 29 U.S.C. A. § 151 et seq., by the issuance of a complaint based on charges filed by Steel Workers Organizing Committee (referred to as S. W. O. C.) and Amalgamated Association of Iron, Steel and Tin Workers of North America, Lodge Nos. 64, 1010 and 1101 (referred to as Amalgamated). The Steel Workers Independent Union, Inc. (referred to as Independent Union), described in the complaint as a company controlled and dominated organization, was permitted to intervene in the proceeding. A hearing before a trial examiner was held at Chicago, Illinois, from June 28 to October 13, 1937. Petitioner, by its counsel, participated in such hearing with opportunity of examination and cross-examination of witnesses, and called several hundred witnesses in its own behalf. Thereafter, the proceedings were transferred to respondent, which, on April 5, 1938, issued a decision and order pursuant to Section 10(c) of the Act. On May 4, 1938, petitioner filed in this court a petition to review and set aside said order, and on May 12, 1938, respondent voluntarily set aside its findings and order of April 5, 1938, for the purpose of permitting further proceedings therein. On June 4, 1938, an order was entered in this court granting respondent's motion to dismiss the petition for review and denying petitioner's cross-petition for an order remanding the proceeding with instructions to dismiss the complaint. Inland Steel Company v. National Labor Relations Board, 7 Cir., 97 F.2d 1006.
On June 7, 1938, respondent issued proposed findings of fact, proposed conclusions of law and a proposed order, to which exceptions were filed by petitioner and the Independent Union. Later, both parties filed briefs with the respondent and, thereafter, on August 22, 1938, oral argument of the case was had before respondent by counsel for petitioner, the Independent Union and the S. W. O. C.
On November 12, 1938, respondent filed its second decision, findings of fact and conclusions of law and issued its second order on said complaint. Respondent found that petitioner had engaged in unfair labor practices within the meaning of Sections 8, (1) (2) and (3) of the Act. Its order, the details of which are not now important, directs petitioner to cease and desist from unfair labor practices, requires petitioner to withdraw all recognition from the Independent Union and upon request, to recognize the S. W. O. C.
The interrogatories before us are tendered in support of Paragraph 22 (5) of the petition which alleges that petitioner was denied its statutory and constitutional *248 right to a hearing before the Board for the reasons therein assigned.[1] Respondent's answer neither admits nor denies the allegations contained in (a) and (f) but alleges they are immaterial. It denies the allegations of (b), (c) and (d) but states further that they are irrelevant and immaterial. Allegations (e) to (k) inclusive are likewise stated to be immaterial to the issue presented for the reason that they are concerned solely with the decision and order of the board dated April 5, 1938, and matters incidental thereto, which order was vacated and set aside by respondent on May 12, 1938, and is not now at issue.
The questions for determination, by reason of respondent's objections to the interrogatories as propounded, are: (1) Has this court jurisdiction to entertain the interrogatories presented and if so, (2) should it be exercised under the existing circumstances. It is the contention of petitioner that jurisdiction exists by reason of Rule 33 of the Federal Rules of Civil Procedure as promulgated by the Supreme Court. 28 U.S.C.A. following section 723c. It is argued by respondent that such rules can apply only to proceedings in the District Courts under the plain language of Rule 1, as well as the statute, *249 28 U.S.C.A. § 723b, which authorizes their adoption.
In National Labor Relations Board v. Cherry Cotton Mills, 5 Cir., 98 F.2d 444, the court considered precisely the same question and found in favor of jurisdiction. In 98 F.2d on page 447 it said:
"We hold that interrogatories for discovery, by analogy to Equity Rule 58 [28 U.S.C.A. following section 723], may be addressed to the opposite party in such an enquiry. That this is substantially a case in equity is apparent from the references in the statute to injunctions and restraining orders and to the language in Sect. 10(h), 29 U.S.C.A. § 160(h): `When granting appropriate temporary relief or a restraining order, or making and entering a decree * * * as provided in this section, the jurisdiction of courts sitting in equity shall not be limited by sections 101 to 115 of this title.' It must also be remembered that District Courts as well as Circuit Courts of Appeal may act under the provisions of the Section. The Circuit Courts may very well, since they sit as courts of equity, act under the equity rules prescribed for the District Courts, rather than go back to the English equity practice. This holding will apply also to the taking of depositions."
We agree with the conclusion there reached and this, irrespective of the applicability of Rule 33, as we entertain no doubt of the inherent power of the court in this respect. Cupples Company Manufacturers v. National Labor Relations Board, decided May 18, 1939, 8 Cir., 103 F.2d 953. The court in National Labor Relations Board v. Jones & Laughlin Steel Corp., 301 U.S. 1, 47, 57 S. Ct. 615, 629, 81 L. Ed. 893, 108 A.L.R. 1352, said: "The act establishes standards to which the Board must conform. There must be complaint, notice and hearing. The Board must receive evidence and make findings. The findings as to the facts are to be conclusive, but only if supported by evidence. The order of the Board is subject to review by the designated court, and only when sustained by the court may the order be enforced. Upon that review all questions of the jurisdiction of the Board and the regularity of its proceedings, all questions of constitutional right or statutory authority are open to examination by the court."
Again in Ford Motor Company v. Labor Board, 305 U.S. 364, 373, 59 S. Ct. 301, 307, 83 L. Ed. 221, it said: "The jurisdiction to review the orders of the Labor Relations Board is vested in a court with equity powers, and while the court must act within the bounds of the statute and without intruding upon the administrative province, it may adjust its relief to the exigencies of the case in accordance with the equitable principles governing judicial action."
In view of the language in the Jones case "upon that review * * * all questions of constitutional right or statutory authority are open to examination by the court," and in the Ford Motor Company case, "may adjust its relief to the exigencies of the case in accordance with the equitable principles governing judicial action," we think it must follow that a court thus empowered is vested with jurisdiction to entertain interrogatories such as are here involved.
Having thus found in favor of jurisdiction, we must decide if the record is such as to require their answer. At this point it is important to note that a good portion of petitioner's argument is directed at the proceedings had prior to and which led up to the decision and order of the Board of April 5, 1938. While this argument is consistent with allegations (e) to (k), inclusive, of Paragraph 22 (5) of the petition (footnote 1), directed solely at the Board's decision of April 5, 1938, and the proceedings had prior thereto, we must concede our inability to comprehend either the force or logic of the position thus sought to be maintained. As heretofore stated, respondent, on May 12, 1938, set aside its findings and orders of April 5, 1938, for the purpose of further proceedings. The proceeding then pending in this court was dismissed. Thus respondent's order of April 5th became a nullity and neither it nor the proceedings had prior thereto can be regarded as determinative of the legality of the second decision entered November 12, 1938.
The court, in Ford Motor Company v. Labor Board, supra, was in many respects, dealing with a similar situation. There, as here, the Board, after the decision in Morgan v. United States, 304 U.S. 1, 58 S. Ct. 773, 999, 82 L. Ed. 1129, obtained leave to withdraw its petition for enforcement. The Board represented at the time that it was its purpose to set aside its order and issue proposed findings with permission to the parties to file exceptions and *250 present argument, and thereafter makes its decision and order. The court granted the Board's motion as requested, and the Board proceeded in conformity with its expressed purpose. The court discusses (305 U. S. page 374, 59 S. Ct. 301, 83 L. Ed. 221) the appropriate procedure, as well as its effect. In 305 U.S. on page 375, 59 S.Ct. on page 308, 83 L. Ed. 221, it is said:
"There is nothing in the statute, or in the principles governing judicial review of administrative action, which precludes the court from giving an administrative body an opportunity to meet objections to its order by correcting irregularities in procedure, or supplying deficiencies in its record, or making additional findings where these are necessary, or supplying findings validly made in the place of those attacked as invalid. The application for remand in this instance was not on frivolous grounds or for any purpose that might be considered dilatory or vexatious. Petitioner had raised a serious question as to the validity of the findings and order. The Board properly recognized the gravity of the contention and sought to meet it by voluntarily doing what the court could have compelled."
It therefore seems plain that when the first order was set aside, the Board was free to conduct such further procedure as it might deem appropriate, and that it could properly predicate its findings and final order upon the entire record in the matter. We, therefore, have no difficulty in concluding that such interrogatories as pertain to the Board's order of April 5, 1938, are irrelevant and immaterial, answers to which could serve no useful purpose. While it is not plain that the remaining allegations of Paragraph 22 (5) of the petition, to-wit: (a) to (d) inclusive, are directed at the proceedings culminating in the Board's order of November 12, 1938, we shall, for the purpose of determining their relevancy, so assume.
In determining whether these allegations are such as to require an answer to the interrogatories submitted in their support, we must look at the proceeding from the time of its inception. That the petitioner was, by complaint, duly advised of the charge preferred, is conceded. Extensive hearings before a Trial Examiner were had thereon. Without a report of such examiner and apparently without argument, the Board adopted its findings and conclusions and asked the court for the enforcement of its order. Evidently, in view of the decision in Morgan v. United States, supra, the Board concluded that further proceedings should be had. Consequently, its order was vacated. Apparently this procedure was followed in other cases and approved in Re National Labor Relations Board, 304 U.S. 486, 489, 58 S. Ct. 1001, 82 L. Ed. 1482. Subsequently, proposed findings of fact, proposed conclusions of law and a proposed order were served upon the petitioner and the Independent Union. Thus the parties were advised in detail, both in law and in fact, as to respondent's position. Exceptions were filed thereto and briefs submitted in connection therewith. Oral argument was had before the Board, participated in by counsel for petitioner, for the Independent Union and the S. W. O. C.
Petitioner relies almost entirely upon Morgan v. United States, 298 U.S. 468, 56 S. Ct. 906, 80 L. Ed. 1288 (referred to as the first Morgan case), Morgan v. United States, 304 U.S. 1, 58 S. Ct. 773, 999, 82 L. Ed. 1129 (referred to as the second Morgan case) and National Labor Relations Board v. Cherry Cotton Mills, 5 Cir., 98 F.2d 444, in support of its contention that it was denied its constitutional right to a hearing before the Board. We have heretofore referred to these cases as authority in support of jurisdiction. And while petitioner points out language, apparently favorable to the contention that it is entitled to an answer to the interrogatories, yet a study of them convinces us they are distinguishable from the instant case. For instance, in the first Morgan case, there was no complaint or other document to advise the petitioner of the Government's claims against it. There were no proposed findings, proposed conclusions or proposed order to which exceptions could be filed. In fact, the petitioner there was never, during the course of the proceedings, advised as to the charges he was called upon to meet. In addition, the oral argument was had before the acting Secretary of Agriculture rather than before the secretary who issued the order. Thus the situation before the court was so strikingly different from what it is here that we do not think the decision is persuasive, much less controlling. In the second Morgan case, the court was again presented with the question as to whether the petitioner had been allowed the hearing required *251 by the statute. After having reviewed the testimony of the secretary with respect to his consideration of the evidence, the court, 304 U.S. on page 18, 58 S.Ct. on page 776, 82 L. Ed. 1129, said:
"In the light of this testimony there is no occasion to discuss the extent to which the Secretary examined the evidence, and we agree with the Government's contention that it was not the function of the court to probe the mental processes of the Secretary in reaching his conclusions if he gave the hearing which the law required. The Secretary read the summary presented by appellants' briefs and he conferred with his subordinates who had sifted and analyzed the evidence. We assume that the Secretary sufficiently understood its purport."
The court then devoted the balance of its opinion to a consideration of whether the appellants had been sufficiently advised of the proposals of the Secretary in the proceeding before him and held that they had not. It was upon this ground the cause was reversed. There is no such question here involved, as petitioner admits it was sufficiently advised as to the issues. It will be noted that the Labor Act was not involved in either of the Morgan cases so the only case in which the Board has been required to answer interrogatories is that of National Labor Relations Board v. Cherry Cotton Mills, supra. There, the outstanding circumstance which distinguishes it from the present case is that the company was not furnished with any proposed findings or conclusions in advance of the entry of the final order. The court 98 F.2d on page 446 made this significant statement: "We do not understand that it is indispensable that the Board members shall have heard the evidence delivered or shall have read it all. Their case is much like that of a busy chancellor. If the evidence has been taken, and the opposing parties appear and argue the case fully, so that the disputes of fact are clearly defined, there is need to read and consider only the evidence bearing on the disputes, other facts being taken as the parties concede them. Where only one side argues, or when neither does, the responsibility of the trior is broader."
In the case at bar, petitioner, as has been stated, was furnished with the proposed findings, conclusions and order, and excepted thereto. Oral argument was had before the Board and written briefs submitted. It is said the Board did not participate in this argument, but it is not to be overlooked that those occupying antagonistic positions were heard. On the one hand was petitioner and the Independent Union and on the other was the S. W. O. C. Thus it appears that the Board had the benefit of argument by those opposed to, as well as those favorable to the proposed findings, conclusions and order.
In National Labor Relations Board v. Biles-Coleman Lumber Company, 9 Cir., 98 F.2d 16, the court considered allegations regarding a lack of due process very similar to the allegations in the instant case and held they were not sufficient. Again, in Cupples Company Manufacturers, a Corporation v. National Labor Relations Board, 8 Cir., 103 F.2d 953, 958, decided May 18, 1939, the court considered allegations with reference to a lack of due process more favorable, in our opinion, to the petitioner than in the instant case and likewise held they were not sufficient. The court, after reviewing the Morgan cases, concludes: "Presuming, as we must, that petitioner's brief was considered, and since the Board has the right to rely upon information of its subordinates as to the evidence submitted, the allegation that the members of the Board did not consider the evidence in arriving at the decision, is, we think, insufficient to justify the court in granting the relief asked. National Labor Relations Board v. Biles-Coleman Lumber Co., supra."
Certainly, it is not essential that the Board or any member thereof be personally present and hear the testimony of the witnesses. The Act expressly makes provision for the taking of testimony otherwise. Neither do we think it can be said as a matter of law that it is incumbent upon the Board or any member thereof to read the testimony or exhibits received in evidence. The requirements in this respect must depend upon the circumstances of each case. Here, the Board heard oral argument by opposing forces and received briefs in support of their respective positions. We think it may be concluded that the Board thus acquired a knowledge of the facts relevant to the issues in dispute which might well have dispensed with the necessity for a reading of the testimony. Especially is this conclusion tenable in connection with the presumption of regularity which must be accorded the acts of the Board, as well as *252 all Government officials;[2] and in addition, allegations (c) and (d) to the effect that neither the Board nor any member judicially weighed or appraised the evidence, nor read any fair, impartial and complete condensation or analysis of the same, are not allegations of fact but mere conclusions. National Labor Relations Board v. Biles-Coleman Lumber Company, supra.
Inasmuch as we are of the opinion that the affirmative allegations fail to state facts disclosing a denial of due process, the objections filed by the respondent to the interrogatories as propounded are sustained and it is ordered that such interrogatories be stricken from the record.
TREANOR, Circuit Judge (concurring).
I concur in the result reached by the majority of the Court. Also I agree that the affirmative allegations fail to state facts disclosing a denial of due process, and I agree that such deficiency affords sufficient reason for the sustaining of respondent's objections to the propounded interrogatories. But I am of the further opinion that this Court is without authority to require the National Labor Relations Board to answer interrogatories. By statute this Court has power to review the National Labor Relation Board's proceedings and to make a decree enforcing, modifying or setting aside the Board's order. But the proceeding in this Court is upon the pleadings, testimony and proceedings set forth in the transcript which is certified by the Board. I do not believe that rule 33 of the Federal Rules of Procedure as promulgated by the Supreme Court applies, either directly or by analogy, to the National Labor Relations Board in a proceeding in this Court to review a proceeding of the Board.
The National Labor Relations Board is an administrative tribunal functioning as an agency of government under Congressional authority. The statute creating the Board and defining its powers and duties defines the scope of review of its decisions. The nature and scope of its powers and duties do not require the National Labor Relations Board to come before a reviewing court as an adversary or opposing party. The reviewing courts test the decisions of the Board on the basis of the pleadings, testimony and proceedings set forth in the transcript, and have no special inquisitorial powers over the official conduct of the members of the Board. It is true that the Supreme Court of the United States has declared that "all questions of the jurisdiction of the Board and the regularity of its proceedings, all questions of constitutional right of statutory authority are open to examination by the court" (Jones & Laughlin case), and that the court "may adjust its relief to the exigencies of the case in accordance with the equitable principles governing judicial action" (Ford Motor Co. case). But it does not seem to me to follow from the foregoing statements that this Court is vested with jurisdiction to entertain interrogatories addressed to the National Labor Relations Board. The foregoing statements of the Supreme Court apply as well to the power of this Court when it is reviewing proceedings of the District Court; but it does not follow that this Court can entertain interrogatories addressed to the District Court and require the District Court to answer.
In the first Morgan case (Morgan v. United States, 298 U.S. 468, 56 S. Ct. 906, 910, 80 L. Ed. 1288) the Supreme Court held that it was error for the District Court to strike out allegations of the bill of complaint in respect to the procedure followed by the Secretary of Agriculture. The suit in that case was to enjoin the enforcement of an order of the Secretary of Agriculture and had been brought in a three judge District Court, 8 F. Supp. 766, in accordance with statutory provisions which made all laws relating to the "suspending or restraining the enforcement" or the "setting aside" of the orders of the Interstate Commerce Commission applicable to the "jurisdiction, powers, and duties of the Secretary" in enforcing the provisions of the Packers and Stockyards Act, 7 U.S.C.A. § 181 et seq. The District Court struck out certain allegations of the bill of complaint with respect to the Secretary's alleged failure to conform his action to the standards of fair hearing. Upon appeal to the Supreme Court from the judgment of the District Court the Supreme Court held that the District Court *253 erred in striking out the allegations, the Court stating that the "defendant should be required to answer these allegations, and the question whether plaintiffs had a proper hearing should be determined."
The nature of the hearing in the Morgan case before the three judge District Court permitted the raising of an issue of fact respecting the procedure adopted by the Secretary of Agriculture. The Packers and Stockyards Act provides generally for a "full hearing" with no specific requirements as to procedure; and, consequently, there is no presumption that any particular course of procedure is followed by the Secretary of Agriculture. It would be a question of fact what course of procedure has been adopted in a particular proceeding, although, assuming a particular course of conduct in a hearing, it would be a question of law whether such conduct constitutes a "fair hearing." In a suit to enjoin the enforcement of a rate order of the Secretary of Agriculture on the ground of denial of a "fair hearing" the District Court must be made cognizant of the procedure actually followed, and that requires a fact determination in the suit to enjoin, unaided by any presumption of law or fact.
The proceeding in the Circuit Court of Appeals to review the action of the National Labor Relations Board does not include a hearing on issues of fact. The National Labor Relations Board, no less than the Secretary of Agriculture, is under a legal duty to conform to the standards of a "fair hearing" in the conduct of its proceedings; but in view of the procedural provisions of the National Labor Relations Act, both in respect to the hearing by the Board and to the review by the Circuit Court of Appeals, it is my opinion that the Circuit Court of Appeals must determine the question of fair hearing from the transcript of the pleadings, testimony and proceedings which is certified by the Board, and cannot compel the Board, or its members, to testify respecting their conduct of the hearing, by requiring them to answer interrogatories. The National Labor Relations Act provides adequate procedural safeguards, and when the transcript, certified by the Board, shows that the proceedings have been conducted in accordance with the provisions of the statute, the Circuit Court of Appeals must presume, in the absence of anything in the record to the contrary, that there has been a "fair hearing," that the Board's conclusion is based upon a consideration of "all the testimony taken," and that the findings stated by the Board are its findings.
Obviously, one who is seeking a review of a decision of the National Labor Relations Board is entitled to have the certified transcript accurately reflect the hearing; and the reviewing court, upon a proper showing and when timely requested, is not without power, in aid of its own jurisdiction, to require the Board to correct any inaccuracies in the transcript and supply any material omissions. A review of a decision of the National Labor Relations Board cannot meet the requirements of judicial hearing unless the reviewing court has before it an accurate report of all material proceedings before the Board or unless the review takes the form of a de novo hearing, and it seems clear that the latter is not contemplated by the National Labor Relations Act.
NOTES
[1] "(a) Neither the Board nor any member thereof was personally present at the taking of testimony or saw or heard testify any of the witnesses called at the hearing.
"(b) Upon information and belief, neither the Board nor any member thereof read the testimony of the witnesses who testified at the hearing or read or inspected the exhibits received in evidence.
"(c) Upon information and belief, neither the Board nor any member thereof judicially weighed or appraised the evidence received at said hearing.
"(d) Upon information and belief, neither the Board nor any member thereof read any fair, impartial and complete condensation or analysis of the evidence received at the hearing.
"(e) After service of the aforesaid order of the Board transferring the proceeding to the Board, despite petitioner's motion aforesaid that it be notified as to whether or not the Board would direct the preparation of an Intermediate Report, petitioner was never (except as the same may have been done in purported further proceedings before the Board after it had vacated its first final order) advised either by the Trial Examiner or by the Board as to the procedure that would thereafter be followed, so that petitioner was thenceforward in the dark as to whether it should await service of an Intermediate Report and file exceptions thereto and a supporting brief, or ask leave to file a brief and be heard in oral argument by the Board without awaiting an Intermediate Report.
"(f) Upon information and belief, the decision and order of the Board of April 5, 1938, in substantially the form in which they were issued, were prepared by subordinates of the Board and not by the Board or any member thereof.
"(g) Upon information and belief, after the Board's order of October 11, 1937, transferring the proceeding to and continuing it before the Board, the evidence received at the hearings before the Board's Trial Examiner was submitted to certain subordinates of the Board unknown to petitioner for the purpose of judicially weighing the evidence and formulating findings of fact, conclusions of law and order thereon.
"(h) Upon information and belief, thereafter certain subordinates of the Board unknown to petitioner prepared findings of fact, conclusions of law and order, and submitted the same to the Board, and the Board, without notice to petitioner and without affording petitioner any opportunity to object or except thereto, made said findings, conclusions and order its own, and issued the same as its findings, conclusions and order of April 5, 1938.
"(i) Upon information and belief, the Board, in making its findings of fact, conclusions of law and order of April 5, 1938, relied wholly or in part upon findings of fact, conclusions and order prepared by its subordinates and submitted to the Board as alleged in the foregoing subdivisions lettered (f), (g) and (h).
"(j) Upon information and belief, the Trial Examiner, who saw and heard the witnesses testify at the hearing, did not, prior to the Board's decision and order of April 5, 1938, prepare or submit to the Board any Intermediate Report or any proposed findings of fact or any recommendations as to findings of fact, and did not inform the Board as to his opinion or belief as to the weight to be attached to the testimony of the witnesses who testified at the hearing.
"(k) Upon information and belief, the findings of fact contained in the Board's decision of April 5, 1938, were not its findings and were not formulated by it upon the evidence but were the findings of its subordinates, who had no authority to make findings under the Act."
[2] United States v. Chemical Foundation, Inc., 272 U.S. 1, 14, 15, 47 S. Ct. 1, 71 L. Ed. 131; Stearns Co. v. United States, 291 U.S. 54, 63, 54 S. Ct. 325, 78 L. Ed. 647; Klamath and Moadoc Tribes of Indians v. United States, 296 U.S. 244, 253, 56 S. Ct. 212, 80 L. Ed. 202. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543557/ | 997 A.2d 967 (2010)
202 N.J. 390
Edward W. and Nancy M. KLUMPP, Plaintiffs-Appellants,
v.
BOROUGH OF AVALON, Defendant-Respondent.
A-49 September Term 2009.
Supreme Court of New Jersey.
Argued March 22, 2010.
Decided June 22, 2010.
*968 Richard M. Hluchan, argued the cause for appellants (Hyland Levin, attorneys, Voorhees).
Michael J. Donohue, Stone Harbor, argued the cause for respondent (Gruccio, Pepper, De Santo & Ruth, attorneys).
*969 Lewin J. Weyl, Deputy Attorney General, argued the cause for amicus curiae New Jersey Department of Environmental Protection (Paula T. Dow, Attorney General of New Jersey, attorney; Lewis A. Scheindlin, Assistant Attorney General, of counsel).
Robert M. Washburn, Cherry Hill, submitted a brief on behalf of amicus curiae Builders League of South Jersey, Inc. (Flaster/Greenberg, attorneys).
Michael J. Fasano, Freehold, submitted a brief on behalf of amicus curiae New Jersey Land Title Association (Lomurro, Davison, Eastman & Munoz, attorneys).
David G. Evans, Pittstown, submitted a brief on behalf of amicus curiae Pacific Legal Foundation.
Richard H. Steen, President-Elect, Princeton, submitted a brief on behalf of amicus curiae New Jersey State Bar Association.
Ann F. Kiernan, New Brunswick, submitted a brief on behalf of amicus curiae National Association of Home Builders.
Gordon N. Litwin, Ocean, submitted a brief on behalf of amicus curiae American Littoral Society (Ansell Zaro Grimm & Aaron, attorneys; Andrew J. Provence, on the brief).
Justice LaVECCHIA delivered the opinion of the Court.
In the wake of the 1962 Atlantic nor'easter storm that devastated much of the New Jersey shore, the Borough of Avalon (Borough), acting pursuant to authority granted by legislative enactment, built a protective dune on property owned by Edward and Nancy Klumpp (plaintiffs or the Klumpps). Plaintiffs' appeal challenges the Borough's failure to adhere to procedural requirements in executing the taking of their private beachfront property and, pointedly, raises the question whether they are to be denied relief on the basis that their claim is out of time. Our holding today recognizes, as did the courts below, that a taking of some dimension[1] occurred when the Borough built the protective dune that restricted plaintiffs' ability to utilize their property, but did not provide plaintiffs with compensation for their loss. We further hold that, ordinarily, the relief available to a property holder from a governmental taking accomplished without adherence to the requirements of the Eminent Domain Act of 1971, N.J.S.A. 20:3-1 to -50, would be to pursue an inverse condemnation action within the six-year statute of limitations period available under N.J.S.A. 2A:14-1. Under the circumstances here, however, equity demands a different result.
Despite acting pursuant to legislative authorization that allowed emergency action subject to later payment of just compensation, the Borough failed to pay just compensation for the private property it seized from plaintiffs. Moreover, the Borough never provided specific notice of its taking of plaintiffs' property and equivocated in even acknowledging the import of its action when plaintiffs tried, in various ways, to reclaim the ability to use their property. Specifically, the Borough failed to identify plaintiffs' property when it announced its initial intention to seize private property in order to create a protective dune in the wake of the 1962 storm, and then denied "taking" plaintiffs' property in response to explicit inquiries from plaintiffs, later adopting a contrary position reflective of the increasingly restrictive terms it placed on the dune-laden property when that suited the Borough's litigation needs. On these unique facts, equity demands that plaintiffs be allowed an exemption *970 from the application of the normal six-year statute of limitations period for the constitutional violation visited on them. Accordingly, we reverse and remand, in limited part, to permit plaintiffs to amend their complaint to add a claim for inverse condemnation and, thus, to pursue valuation of the property at the time of the taking that occurred in or around 1965, when the dune was constructed on their property.
I.
The facts and history to this matter were developed in the record presented to the trial court initially and amplified on remand from the Appellate Division. We summarize the relevant evidence and the trial court's findings and conclusions based on the record presented.
On January 19, 1960, plaintiffs purchased a block of oceanfront property in the Borough of Avalon. The Borough is situated on a portion of a barrier island called Seven Mile Beach. The Borough's tax map identifies the property at Block 74.03 located at the eastern end of 75th Street, covering Lots 2, 4, and 6. The dirt road that comprised 75th Street provided the only public access to the property and ended at the sand area of the beach. The Klumpps immediately built a single-family home on their property, which they used during the summers of 1960 and 1961. Their enjoyment of the home was short-lived.
In March 1962, a devastating Atlantic nor'easter storm, dubbed by the U.S. Weather Bureau "The Great Atlantic Storm," struck Seven Mile Beach, causing serious flooding and damage to the coastline and destroying homes and other beachfront properties. See Arthur I. Cooperman & Hans E. Rosendal, Mean Five-Day Pressure Pattern of the Great Atlantic Coast Storm, March 1962, 91 Monthly Weather Rev. 337, 337 (1963); see also Larry Savadove & Margaret Thomas Buchholz, Great Storms of the Jersey Shore 103 (1993).[2] Immediately after the storm, the Klumpps returned to survey the damage and claim their possessions. They found the house leveled, the roof lying on the ground, and their personal belongings littering their lot. They did not return again until several years had passed.
As a result of the catastrophic damage to the shore communities, the New Jersey Legislature, drawing on the State's emergency powers, enacted legislation to address the emergency caused by the storm's serious erosion and destructive consequences. See N.J.S.A. App. A:9-51.5 (the Act). In a preamble, the Legislature expressed the dire nature of the situation:
Whereas, The shores and beaches of this State have been recently devastated by storms, floods and action of the sea to the extent that large sections of the sand barriers which protect the mainland have been washed away and eroded, thereby leaving the remainder of the sand barriers and the shore municipalities in imminent danger of further serious *971 erosion and destruction with consequent peril to life and property; and
Whereas, The existence of this situation has clearly demonstrated the necessity for shore municipalities, under these and similar circumstances, to have clear authority for the undertaking of immediate emergency procedures; and
Whereas, The Legislature finds that such procedures may necessitate authority for the exercise of a right of immediate entry upon property for the purpose of demolishing and removing buildings and structures thereon, and for effecting improvements and repairs so as to prevent a recurrence of such condition.
[L. 1962, c. 48, § 1.]
The operative provisions of the Act authorized those municipalities bordering the Atlantic Ocean where damage occurred, to act pursuant to resolution, and "repair, restore, replace or construct such protective barriers" that were "necessary to the health, safety and welfare of the municipality." N.J.S.A. App. A:9-51.5. The municipalities were authorized "to enter immediately upon such property to take control and possession thereof, and to do such acts as may be required, including removing, destroying or otherwise disposing of any property located thereon without first paying any compensation therefor." N.J.S.A. App. A:9-51.5.
Pursuant to the Act's authority, on August 15, 1962, the Borough adopted two resolutions at a public meeting. One, entitled "Authorization to Enter Property to be used as protective barriers," authorized the Borough "to take control and possession" of property immediately and "to do such acts as may be required, including removing, destroying or otherwise disposing of any property located thereon without first paying any compensation therefor." Resolution No. 62-102. The resolution also duly noted that the Borough could not deny a person with interest in property the right to just compensation if the Borough's occupation of the property amounted to a taking. Ibid. The second resolution eliminated the need for compliance with the Borough's public bidding requirements because hurricane season was imminent, and the Borough urgently needed to "construct protective barriers in the form of Sand Dunes between 13th and 80th Streets." Resolution No. 62-103. The resolutions were recorded with the Borough Clerk, however, no actual notice was provided to the Klumpps.[3]
Sometime after the passage of the emergency-related resolutions in 1962, the Borough initiated its dune rebuilding project. It is undisputed that part of the project included the construction of a dune on the Klumpps' property. The Borough limited access to the Klumpps' property by placing around it fences that bordered the beach and the street. The Borough also constructed a footpath for public access to the beach, which crossed the Klumpps' property in certain areas and was marked by fences running along both sides. Plaintiffs acknowledged that when they visited their property "a few years" after the 1962 storm (but sometime prior to 1997), they discovered a dune built on it. With no information from the Borough to the contrary, plaintiffs believed they remained the *972 rightful owners of the property. To confirm that belief, the Klumpps checked the Borough's official town map, which designated their property as under private ownership rather than publicly-owned tax exempt property.
After the dune rebuilding project was completed in April 1965, the Borough adopted a series of ordinances regulating the use of beachfront property. The first of the series, adopted by the Board of Commissioners of the Borough in 1968, Ordinance No. 393, established a "dune line" west of the Klumpps' property, which prohibited the redistribution or removal of sand from land east of the dune line. Another, adopted in 1969, vacated the public right of access to a portion of 75th Street, which provided access to the Klumpps' property, see Ordinance No. 416, and in 1971, the Borough adopted another ordinance that required payment from any person who wished to access the beach, Ordinance No. 468. Ten years later, in 1979, the Borough changed the zoning district that included plaintiffs' property, and prohibited construction of residential structures within the re-designated area. Ordinance No. 614.[4]
Notwithstanding the multiple resolutions and ordinances over time regulating beachfront use and development, and authorizing urgent protective dune system construction, the Borough maintained throughout its pre-litigation dealings with the Klumpps that it had not effectuated a taking of plaintiffs' property and that title to the property remained with the Klumpps. It was not until after the Klumpps commenced litigation that the Borough conceded, in 2005, that a taking had occurred. Previously, the Borough had taken a contrary stance in correspondence between the Klumpps and the Borough. In 1997, the Klumpps' attorney asserted, through a letter to the Borough Clerk, that the Borough's ordinances had deprived the Klumpps of complete use of their property and, thus, effectuated a taking, which entitled them to compensation. A letter response from the Borough Solicitor disputed that a taking had occurred and noted that the current environmental conditions surrounding the property "represent the antithesis of human habitability." The Solicitor also suggested that the New Jersey Department of Environmental Protection (DEP) would deny any application by the Klumpps for a construction permit, even if one were to be approved first by the Borough. Eager to make use of their property, the Klumpps, through their attorney, notified the Borough Solicitor that they would pursue a use variance, as required by Borough ordinance, and reiterated their position that a regulatory taking occurred. Again, the Borough Solicitor's response reasserted that no taking had occurred.
The dispute came to a head in 2003, when the Klumpps applied to the DEP for approval to build a single-family dwelling on their property. The DEP denied the application for a permit because, among other reasons, the Klumpps could not demonstrate that they had access to the property. *973 The Klumpps notified the Borough of the problem, requested a meeting to establish access to the property, and reasserted the illegality of the Borough's regulatory taking without just compensation. The Borough neither responded to that letter, nor to any of the Klumpps' three follow-up letters.
Throughout this period, however, and indeed dating back to the time of the 1962 storm, plaintiffs continued to receive tax bills, which they paid until the instant litigation commenced. The value of their property, as assessed after the storm, never exceeded $300, as compared to the $3,600 valuation prior to the storm.[5] Indeed, as late as 2002, in a letter concerning a revaluation of their property, the Borough's tax assessor addressed the Klumpps as the owners of the property.
The Klumpps filed the complaint commencing this matter on November 18, 2004. They sought a declaratory judgment that they had a right to access the property and that the Borough had the ability to convey access, and sought an order compelling the Borough to provide them with access. The Borough's answer, dated December 17, 2004, admitted that the Klumpps owned the property, denied that the Borough had the ability to convey access, and asserted separate defenses and counterclaims. One defense and counterclaim contended that the Borough had gained title to the property through adverse possession. The Borough claimed that it had been in actual possession since 1962 when it began to construct a dune on the Klumpps' property. The other counterclaims alleged that the Borough had obtained either a prescriptive or "public trust" easement over the property.
The matter proceeded on cross-motions for summary judgment. The Klumpps moved for judgment granting legal recognition of an implied right of access to their property. The Borough's cross-motion for summary judgment contended that the expiration of the statute of limitations and doctrine of laches barred the Klumpps' claim. In support of its motion, a certification by the Borough Administrator, dated July 29, 2005, asserted for the first time that Resolution Nos. 62-102 and 62-103 from 1962 had effectuated a taking of the Klumpps' property as of August 15, 1962.[6]
The trial court granted summary judgment to the Borough and dismissed the Klumpps' complaint without prejudice to their filing an inverse condemnation claim in response to the taking. The court found that the Borough had been in possession of the Klumpps' property since approximately 1962, even though the Klumpps remained record title owners of the property. The Klumpps appealed that decision.
On January 29, 2007, in an unpublished decision, the Appellate Division reversed the trial court's judgment, which dismissed plaintiffs' complaint, and remanded for further proceedings. The panel stated that it "lack[ed] confidence on this record that the Borough" had been in continuous possession of the property since "the early 1960s." The panel found the Borough's assertions that it maintained and monitored the dune after construction was complete by 1965 did "not necessarily establish possession," and noted further *974 that a public entity could enter private property temporarily "without continuing to occupy the property." The panel recognized the Klumpps' right to access "the vacated portion of 75th Street," but concluded that it could not determine from the record whether the Borough had the ability to provide that access. Accordingly, the panel remanded for further proceedings.
Following the Appellate Division decision, the Klumpps amended their complaint to include damages for continuing trespass and for ejectment based on unlawful possession. The Borough's answer sought a judgment declaring that: 1) the Borough had effectuated a taking in 1962, which deprived the Klumpps of title to their property; 2) the Klumpps failed to take legal action within six years to recover compensation, their sole remedy; and 3) the Borough is the legal and equitable title owner of the property. The Borough also reasserted its original counterclaims and separate defenses, including adverse possession.
At the remand hearing on January 17, 2008, the following procedural steps helped to focus the proceedings. The Klumpps withdrew their claim for trespass, acknowledging that they could not prove damages. They continued, however, to maintain their action for ejectment, contending that they were the rightful owners of the property and therefore were entitled to a right of access to the property. The Borough admitted that a taking occurred in 1962 and, further, that the Klumpps no longer retained an ownership interest in the property. The Borough maintained that the Klumpps had no right to access the property; however, the Borough conceded that, prior to the assertion of its counterclaim, it never before had alleged that it owned the property.
In reaching its findings and conclusions on the remand issues, the trial court noted that it relied on facts from the proceeding in Raab v. Borough of Avalon, 392 N.J.Super. 499, 921 A.2d 470 (App.Div.), certif. denied, 192 N.J. 475, 932 A.2d 26 (2007). The court then entered judgment for the Borough, dismissing the Klumpps' claims for access to the property, trespass, and ejectment. It determined that the Klumpps retained only "bare legal title" to the property. The court also dismissed, as moot, the Borough's counterclaim to title by reason of adverse possession or by prescriptive or "public trust" easement. Because the court determined that the Borough had exclusive possession and control of the property without ever having sought, let alone having obtained, permission from the Klumpps to use or occupy the property, the court found that the Borough's conduct constituted a taking as of 1962. The court also found that a further "regulatory taking" occurred in 1979 when the property was re-zoned from residential to public use. As for the Klumpps' right to access to the property, the court determined that due to DEP regulations and the contractual obligations between the Borough and the DEP, the Borough could no longer provide access to the Klumpps.
The court further found that the Borough's contradictory actions over the years had reinforced the Klumpps' belief that they maintained an ownership interest in the property. The court specifically contrasted the Borough's early assertions that the Klumpps were the owners and its corresponding denials of a taking, with the Borough's later admission, in litigation, that it owned the property and that a taking had occurred. Nevertheless, the court determined that the Klumpps were aware that the Borough had used its property as part of the dune protection program and that they "essentially abandoned any effort to possess or utilize the property after 1962." Because the Klumpps never brought an action seeking compensation, *975 the court found it unnecessary to address application of the statute of limitations for a claim seeking compensation for a regulatory or possessory taking.
The Klumpps appealed again, and the Appellate Division affirmed. The panel stated that "inverse condemnation has occurred, and that the Borough is the true owner of the property." Inverse condemnation, the panel explained, "provides a remedy designed to insure that the owner whose land was taken de facto receives just compensation. . . . It is the taking of possession without payment that constitutes the very essence of inverse condemnation." Here, "the tax bills, Borough records, and recorded title ownership" demonstrated, according to the panel, "indicia of plaintiffs' bare legal title . . . and nothing more." The panel further described its conclusion that plaintiffs have bare legal title as consistent with its conclusion that inverse condemnation had occurred. It held, therefore, that once the Klumpps became aware of the Borough's physical occupation of their property the burden shifted to them to seek compensation.
Finally, the panel affirmed the trial court's determination that municipal Ordinance Nos. 393 and 614 denied the Klumpps all practical and beneficial use of their property and effected a regulatory taking. However, the panel determined that the regulatory taking was a moot issue because the "inverse condemnation occurred by way of the Borough's physical occupation of the property" in 1962.
The Klumpps petitioned for certification, which we granted, 200 N.J. 503, 983 A.2d 1111 (2009), to review the judgment entered in favor of the Borough and against the Klumpps.
II.
Several principles of law control the government's actions in respect of the property of its citizens. Basic among them is the constitutional protection against the taking of private property without just compensation. U.S. Const. amend. V ("[N]or shall private property be taken for public use, without just compensation."); N.J. Const. art. I, ¶ 20 ("Private property shall not be taken for public use without just compensation."); N.J. Const. art. IV, § 6, ¶ 3 ("Any agency or political subdivision of the State or any agency of a political subdivision thereof, which may be empowered to take or otherwise acquire private property for any public highway, parkway, airport, place, improvement, or use may be authorized by law to take . . .; but such taking shall be with just compensation.").
The New Jersey Constitution provides protections against governmental takings of private property without just compensation, coextensive with the Takings Clause of the Fifth Amendment of the United States Constitution. Mansoldo v. State, 187 N.J. 50, 58, 898 A.2d 1018 (2006). The government is forbidden "from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole." Greenway Dev. Co. v. Borough of Paramus, 163 N.J. 546, 553, 750 A.2d 764 (2000) (internal quotation marks and citations omitted). A constitutional taking may occur in one of two ways: 1) via physical taking, in which the government takes title to private property or "authorizes a physical occupation [or appropriation] of property"; or 2) via regulatory taking, through which a government regulation deprives the property owner of all economically viable use of their land. Yee v. Escondido, 503 U.S. 519, 522, 112 S.Ct. 1522, 1526, 118 L.Ed.2d 153, 162 (1992); see Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1015, 112 S.Ct. 2886, 2893, 120 L.Ed.2d 798, 812-13 (1992); Gardner v. N.J. Pinelands Comm'n, 125 N.J. 193, 205, *976 593 A.2d 251 (1991); Littman v. Gimello, 115 N.J. 154, 161-62, 557 A.2d 314 (1989); Washington Mkt. Enters. v. City of Trenton, 68 N.J. 107, 117-18, 343 A.2d 408 (1975). Physical occupation or appropriation of property is usually an obvious demonstration of a taking and "qualitatively more severe than a" less apparent regulatory taking. Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 436, 102 S.Ct. 3164, 3176, 73 L.Ed.2d 868, 883 (1982); see Bernardsville Quarry, Inc. v. Borough of Bernardsville, 129 N.J. 221, 231, 608 A.2d 1377 (1992). Regardless of the exact method employed, where a taking occurs, the Takings Clause requires the government to compensate the property owner. Escondido, supra, 503 U.S. at 522, 112 S.Ct. at 1526, 118 L.Ed.2d at 162; see N.J. Const. art. I, ¶ 20; N.J. Const. art. IV, § 6, ¶ 3.
Because this matter involves an initial physical taking, our focus is narrowed. To accomplish a physical taking, the government may either enter the land without authorization or exercise its power of eminent domain through a condemnation proceeding. United States v. Clarke, 445 U.S. 253, 255-56, 100 S.Ct. 1127, 1129-30, 63 L.Ed.2d 373, 376-77 (1980) (citing United States v. Dow, 357 U.S. 17, 21, 78 S.Ct. 1039, 1044, 2 L.Ed.2d 1109, 1114 (1958)). New Jersey's Eminent Domain Act (EDA) authorizes government seizure of property under certain circumstances requiring a condemnation proceeding. N.J.S.A. 20:3-1 to -50. If the government seizes property without first bringing a condemnation proceeding, the burden shifts to the individual to bring an action to compel condemnation, known as "inverse condemnation." Greenway, supra, 163 N.J. at 553, 750 A.2d 764; Rohaly v. Dep't of Envtl. Prot. & Energy, 323 N.J.Super. 111, 115, 732 A.2d 524 (App. Div.1999); see Clarke, supra, 445 U.S. at 257, 100 S.Ct. at 1130, 63 L.Ed.2d at 377-78. The concept of inverse condemnation recognizes that the landowner may initiate the action to compel compensation from government; one need not wait in vain for government compensation. See Clarke, 445 U.S. at 257, 100 S.Ct. at 1130, 63 L.Ed.2d at 377-78; Greenway, supra, 163 N.J. at 553, 750 A.2d 764. The time frame for pursuing such an action is a question that we have not previously addressed.
III.
The question of the applicable time frame for commencing an inverse condemnation action has been considered by the appellate courts of our state. The Appellate Division has held that the applicable statute of limitations for bringing an inverse condemnation action is the six-year period set forth in N.J.S.A. 2A:14-1. See Raab, supra, 392 N.J.Super. at 511, 921 A.2d 470; Russo Farms, Inc. v. Vineland Bd. of Educ., 280 N.J.Super. 320, 327, 655 A.2d 447 (App.Div.1995) (finding six-year statute of limitations applicable to plaintiff's inverse condemnation claims), aff'd in part and rev'd in part on other grounds, 144 N.J. 84, 675 A.2d 1077 (1996) (declining to reach statute of limitations issue because issue not raised on appeal); Harisadan v. City of E. Orange, 187 N.J.Super. 65, 68-69, 453 A.2d 888 (App.Div.1982); see also 287 Corp. Ctr. Assocs. v. Twp. of Bridgewater, 101 F.3d 320, 324 (3d Cir. 1996) (applying six-year statute of limitations to inverse condemnation claim brought under New Jersey law). N.J.S.A. 2A:14-1 provides that
[e]very action at law for trespass to real property, for any tortious injury to real or personal property, for taking, detaining, or converting personal property . . ., or for recovery upon a contractual claim or liability, express or implied . . . shall be commenced within 6 years next after the cause of any such action shall have accrued.
*977 Although the term "inverse condemnation" is not explicitly mentioned in the statute, we agree with the Appellate Division's observations that the concept fits comfortably within the statute's purview. Moreover, holding inverse condemnation actions to the six-year limitations period for trespass and injuries to real property, and implied contract liability, sensibly aligns this aspect of our takings jurisprudence with that of the federal constitutional takings jurisprudence.
A six-year statute of limitations governs a landowner's inverse condemnation claim based on the physical taking of land by the federal government. United States v. Dickinson, 331 U.S. 745, 747, 67 S.Ct. 1382, 1384, 91 L.Ed. 1789, 1793 (1947). In Dickinson, the United States Supreme Court recognized that takings claims were subject to a statute of limitations, and that such claims specifically were governed by the statute of limitations for filing a civil action against the federal government. Id. at 746-47, 67 S.Ct. at 1383-84, 91 L.Ed. at 1792-93.[7] Thus, holding our state inverse condemnation actions to the same time period fosters uniformity and promotes the same interest in timely valuation of a governmental taking, whether the action lies under federal or state constitutional principles.
In canvassing the law of other states, we note that the limitations periods for inverse condemnation actions vary. When there is no statute of limitations on point, some states apply the statute of limitations for adverse possession, or recovery of real estate, to inverse condemnation actions. See, e.g., Sundell v. New London, 119 N.H. 839, 409 A.2d 1315, 1321 (1979) (twenty years); Reitsma v. Pascoag Reservoir & Dam, LLC, 774 A.2d 826, 837 (R.I.2001) (ten years); see also 26 A.L.R.4th 68, 71-73, 83-87 (1983) (citing cases and reasoning that just compensation for taking is fundamental constitutional right not to be limited by statutory construction in absence of clear legislative proscription). Conversely, other states have applied statutes of limitations based on, for example, implied contract theory or linkage to general civil statutes, which tend to provide shorter limitations periods. See, e.g., Beer v. Minn. Power & Light Co., 400 N.W.2d 732, 735-36 (Minn.1987) (applying separate statute of limitations for inverse condemnation actions; six years for takings resulting from limited access only, and fifteen years for actual taking of property); Richmeade, L.P. v. City of Richmond, 267 Va. 598, 594 S.E.2d 606, 610 (2004) (finding inverse condemnation based on government's breach of implied contract to compensate owner and thus subject to three-year limitations period); Dep't of Forests, Parks & Rec. v. Town of Ludlow Zoning Bd., 177 Vt. 623, 869 A.2d 603, 607 (2004) (applying general civil statute of limitations, six years, for inverse condemnation action when no statute explicit on inverse condemnation limitations).
In New Jersey, a limitations period of thirty years of actual possession is applied to adverse possession claims to real property, except for woodlands or uncultivated tracts, for which sixty years possession is required. N.J.S.A. 2A:14-30. However, in our view, the thirty-year period applicable to private takings of another's real property does not fit with the interests involved when government takes private real property. The government's ability to appropriate private property is tied to the requirement that it put the property to *978 public use. See N.J. Const. art. I, ¶ 20. That purpose would be undermined if a long period of uncertainty were allowed in respect of property ownership, assuming that the State has not commenced condemnation proceedings under the EDA. In circumstances that involve the physical occupation of property by the government, the stark act of the governmental entry and seizure of the property "requires the landowner to submit to the physical occupation of his land," see Yee, supra, 503 U.S. at 527, 112 S.Ct. at 1528, 118 L.Ed.2d at 165, and thus provides reasonable assurance that the landowner will have adequate notice and opportunity within a six-year period to institute an inverse condemnation action for just compensation. Moreover, the limited time frame for pursuing a compensation claim advances the public interest in providing fair compensation for the government's taking. The closer in time the landowner commences the action, the more precise the valuation, particularly when improvements by the government may be forthcoming and would alter the condition of the property at the time of the taking.
A sounder public policy is advanced by applying the six-year statute of limitations period identified by the Legislature for trespass and injuries to real property to an inverse condemnation claim. It is not insignificant that, were one to apply our state's thirty- or sixty-year adverse possession limitations period to inverse condemnation suits, our state takings jurisprudence would be out of step with the United States Supreme Court's holding as to the applicable time frame in federal takings actions. And, furthermore the application of a six-year limitations period is not inconsistent with positions taken by several sister states.
In sum, we hold, for the reasons discussed, that where a governmental entity takes property for public use and provides adequate notice through physical or regulatory action, application of N.J.S.A. 2A:14-1's six-year statute of limitations is reasonable, promotes the goals of judicial efficiency and uniformity, and diminishes the uncertainty of property ownership and potential future litigation. Under either principle for accomplishing the taking physical or regulatoryfollowing the governmental seizure of the property, the cause of action for inverse condemnation begins to accrue on "the date the landowner becomes aware or, through the exercise of reasonable diligence, should have become aware, that he or she had been deprived of all reasonably beneficial use." Raab, supra, 392 N.J.Super. at 503, 921 A.2d 470 (citing Russo Farms, Inc., supra, 280 N.J.Super. at 325, 655 A.2d 447 and Harisadan, supra, 187 N.J.Super. at 68-69, 453 A.2d 888); see also Rosenau v. City of New Brunswick, 51 N.J. 130, 137-40, 238 A.2d 169 (1968) (finding cause of action for injury to real property under N.J.S.A. 2A:14-1 accrues when injury occurs, subject to discovery rule). We therefore turn to the timeliness issue raised in this matter.
IV.
A.
Application of the limitations period we have now determined to constrain inverse condemnation actions does not satisfactorily resolve this case. The rub in this matter lies in the trial court's mistaken belief that the facts are on all fours with what occurred in Raab, on which the trial court below relied and to which it analogized.
In Raab, the Borough directly notified the plaintiffs that, through the property-exchange program, any property taken as part of the dune construction project could be exchanged for other property. Raab, supra, 392 N.J.Super. at 505-06, 921 A.2d *979 470. As a result, the Appellate Division concluded that the Raab plaintiffs were barred from bringing an inverse condemnation action because they were aware of the taking when the Borough took exclusive possession of their property, and had failed to bring their claim within the six-year period. Id. at 503, 513, 921 A.2d 470.
Here, in contrast, there is no evidence to indicate that the Borough informed the Klumpps of the property-exchange program. Indeed, there is no explanation why the Klumpps were not included in the property-exchange program when their property clearly was part of the dune construction project. Nor did the Borough directly notify plaintiffs in any other way that it was utilizing its authority under the State Legislature's emergency powers authorization to appropriate the Klumpps' private property as part of its shore protection plan. That is, there was no express admission of such intention until the Borough asserted its position in 2005 that a taking had occurred.
Only when engaged by the Klumpps' litigation did the Borough raise, in each of its answers, a defense of adverse possession, claiming that it had maintained "notorious, actual, adverse, exclusive, continuous, and uninterrupted possession" in excess of forty years. And, in its counterclaim, it sought a declaratory judgment against plaintiffs for title to the land and advanced two bases for that claim of relief: 1) the statutory requirement that an action to recover title to real estate to be brought within twenty years of its accrual, N.J.S.A. 2A:14-6, and 2) the vesting of title by way of adverse possession, N.J.S.A. 2A:14-30. See J & M Land Co. v. First Union Nat'l Bank, 166 N.J. 493, 517, 766 A.2d 1110 (2001) (reaffirming right of entry to recover real estate must be exercised within twenty years). Thus, the Borough maintained that plaintiffs are barred from now making a claim to title because title vested in the Borough through operation of adverse possession and therefore the plaintiffs were not entitled to relief.
Based on the Borough's position up until 2005 that a taking did not occur, plaintiffs understandably sought recourse through demands for access to their property that led to the declaratory judgment action demanding access and the later-added claims for trespass and ejectment of the Borough from their land. After finally conceding, in 2005, that a taking occurred forty-three years earlier, the Borough now attempts to hide behind the six-year statute of limitations to claim that plaintiffs have no right to an inverse condemnation action. In light of these circumstances and in the interest of "justice and fairness," plaintiffs must be afforded a remedy for the appropriation of their property to public use. See In re "Plan for Orderly Withdrawal from N.J." of Twin City Fire Ins. Co., 129 N.J. 389, 414, 609 A.2d 1248 (1992) (quoting Penn Cent. Trans. Co. v. New York City, 438 U.S. 104, 124, 98 S.Ct. 2646, 2659, 57 L.Ed.2d 631, 648 (1978)) (favoring "highly nonformal, open-ended, multi-factor balancing method" to determine when justice and fairness requires government compensation for losses caused to private citizens) (quoting Frank Michelman, Takings, 1987, 88 Colum. L.Rev. 1600, 1621 (1988)); cf. W.V. Pangborne & Co. v. N.J. Dep't of Transp., 116 N.J. 543, 553-57, 562 A.2d 222 (1989) (endorsing application of doctrine of equitable estoppel to bar assertion of statute of limitations defense by public entity "to prevent manifest injustice").
B.
As a reviewing appellate court, we recognize our duty not to "disturb the factual findings and legal conclusions of the trial judge unless we are convinced *980 that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice." Abtrax Pharm. v. Elkins-Sinn, Inc., 139 N.J. 499, 517, 655 A.2d 1368 (1995) (internal quotation marks omitted) (quoting Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484, 323 A.2d 495 (1974)). That standard poses no impediment here for we agree with the trial court's conclusion, affirmed by the Appellate Division, that a physical taking of some dimension occurred in respect of the Klumpps' property no later than in 1965.[8]
Immediately after the storm in 1962, the Borough began its dune construction project that ultimately resulted in the construction of a protective dune on a portion of plaintiffs' property. As part of the dune project, the Borough placed fences to limit public access to the property from the beach and street, and it also constructed a pathway for public access to the beach from the vacated street to the beach that crossed over portions of the Klumpps' property. Those Borough actions constituted a physical taking. Although the Borough did not officially advance the position that it had taken the property until after litigation commenced in 2004, that does not eviscerate the occurrence of the physical taking. See Clarke, supra, 445 U.S. at 257, 100 S.Ct. at 1130, 63 L.Ed.2d at 378 ("To accomplish a taking by seizure.. . a condemning authority need only occupy the land in question."); Washington Mkt. Enters., supra, 68 N.J. at 117, 343 A.2d 408 ("From [the early] cases there developed the idea of physical invasion or appropriation as the chief criterion for determining whether a `taking' had occurred."). Although physical invasion and physical taking of real property by a governmental entity ought to be notice sufficient to awaken property owners to act to protect their interest in receiving compensation for the taking, government also should provide some other form of notice to affected property owners before, and surely after, a physical taking. It should go without saying that turning such square corners is minimally what citizens should be able to expect from their government when such drastic action is visited on property owners.
Here, instead of assuming responsibility for its taking of the Klumpps' property, the Borough skirted its obligation to answer for its action. The Borough's inconsistent positions toward the Klumpps' status in respect of the property should not be permitted to work to its advantage. We cannot ignore the tax bills that were sent to the Klumpps as owners of this property, the Borough's designation of the property as private on official town maps, and the various contradictory positions taken by the Borough even when faced by assertions that it had taken the Klumpps' property through the erection of a dune with its immediate use restrictions. Thus, while ordinarily a property owner would be expected to protect his or her interests in property that is physically seized through the assertion of a timely inverse condemnation action, here there are multiple reasons for concluding against strict enforcement of the limitations period for filing such actions.
Although the Klumpps have resorted to the courts seeking only to use their property and have not pled, to date, a claim for *981 inverse condemnation, such a demand was posited to the Borough in their efforts to resolve this matter in 1997, when through a letter to the Borough Clerk, they demanded compensation for the taking of their property. In response, not only did the Borough reject plaintiffs' demand for compensation, it denied that its actions effectuated a taking. Subsequently, when the Klumpps requested a right to access their property in order to fulfill DEP permit requirements, the Borough failed to respond or to provide access, even though the official town map and property tax valuation designated the Klumpps record title owners of the property. The Borough maintained its "no-taking" position until litigation commenced, only then asserting that a taking had occurred in 1962a position both consistent with its counterclaim for adverse possession and its defense to plaintiffs' claim for a right of access. Government should not be permitted to invoke a legal theory only to abandon it later in favor of another that time-bars an otherwise valid claim. In the face of the positions taken by these parties, it would be unjust to allow this action to end with a judgment both depriving plaintiffs of their property and refusing them any compensation therefor.
Indeed, it bears noting that in the very resolution passed by the Borough in 1962, pursuant to the emergency authorization to shore communities contained in N.J.S.A. App. A:9-51.5, the Borough acknowledged its obligation to pay just compensation for the property it was about to seize in order to construct its shore-protecting dune. That promise was not kept in respect of the Klumpps. The Borough cannot now, in equity, stand behind the six-year statute of limitations period for an inverse condemnation action. See W.V. Pangborne & Co., supra, 116 N.J. at 553-57, 562 A.2d 222 (1989). To the extent that the judgment cut off the Klumpps from access to such an action, we reverse and remand. Equity demands that the Klumpps be allowed the opportunity to amend their complaint to include a claim for inverse condemnation. See Schiavone Constr. Co. v. Hackensack Meadowlands Dev. Comm'n, 98 N.J. 258, 265-66, 486 A.2d 330 (1985). We therefore remand to the trial court for further proceedings to determine the amount of just compensation the Borough must pay to plaintiffs. See Clarke, supra, 445 U.S. at 258, 100 S.Ct. at 1130, 63 L.Ed.2d at 378 (setting property value at time of taking); Washington Mkt. Enters, supra, 68 N.J. at 123-24, 343 A.2d 408 (entitling plaintiffs to value of property as of date of taking, plus interest).
V.
The judgment of the Appellate Division is affirmed in part and reversed in part, and the matter is remanded for further proceedings consistent with this opinion.
For affirmance in part/for reversal in part/remandmentChief Justice RABNER and Justices LONG, LaVECCHIA, ALBIN, WALLACE, RIVERA-SOTO and HOENS7.
OpposedNone.
NOTES
[1] We cannot discern from the present state of this record the precise extent of the taking of plaintiffs' property that occurred following the 1962 storm.
[2] The Great Atlantic Storm of March 1962 "has been claimed to be the most damaging extratropical east coast storm of [the] century." Cooperman & Rosendal, supra, at 337. In its aftermath, newspapers reported "houses sticking up above the waters like houseboats on a lake." Fred J. Cook, The Case of the Disappearing Coastline, N.Y. Times, Sept. 25, 1966. Then Governor Richard J. Hughes described the storm as one of the "worst disasters of recent years in New Jersey" and requested that President John F. Kennedy declare the coastal area affected by the storm a "Federal disaster area" and thus provide federal aid. Russell Porter, Storm Hits Coast 2d Day; 27 Dead, Damage Heavy, N.Y. Times, Mar. 8, 1962 (internal quotation marks omitted). A number of counties, including Cape May County, "declared states of emergencies." Ibid.
[3] The Borough also initiated a property-exchange program in an effort to compensate property owners whose lots were affected by the storm. See Raab v. Borough of Avalon, 392 N.J.Super. 499, 505, 921 A.2d 470 (App. Div.), certif. denied, 192 N.J. 475, 932 A.2d 26 (2007). The program enabled owners to exchange their properties for lots owned by the Borough. Ibid. The record is devoid of any evidence that the Borough offered this property-exchange program to the Klumpps or that the Klumpps were aware of the program's existence.
[4] Also in 1979, the Borough adopted Ordinance No. 628, which initially prohibited all development on beaches or dunes unless the purpose of the development was only capable of being effectuated in a beach or dune area and it would not pose any significant long-term adverse effects to the organic function of the beach and dune system. Later in the same year the ordinance was amended by Ordinance No. 236-87, which conditioned all forms of construction in the dune area on approval from the Borough. In 1994, as a condition of accepting funds from the New Jersey Department of Environmental Protection (DEP), the Borough acceded to the imposition of another requirement on property owners who wished to develop on the dune area, namely, DEP approval prior to any building on or around dune areas.
[5] The tax bill in 2005 resulted in payment of forty-six cents.
[6] In his certification, the Borough Administrator relied on the trial court's findings in Raab to reason that the Klumpps property, which was situated nearby the property at issue in Raab, was subject to the same resolutions and dune construction project that constituted the "taking" found in Raab. See Raab, supra, 392 N.J.Super. 499, 921 A.2d 470.
[7] In Dickinson, supra, the actions were brought in 1947 under the Tucker Act. 331 U.S. at 746-47, 67 S.Ct. at 1383-84, 91 L.Ed. at 1792-93. The relevant provisions of the Tucker Act that provide the statute of limitations periods for civil actions against the United States government currently appear at 28 U.S.C. § 2401.
[8] Because we find that a physical taking occurred and thus plaintiffs have a right to just compensation, we need not reach the issue of whether the ordinances and regulations effectuated a regulatory taking. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2857916/ | IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-281-CV
PROVIDENCE LLOYD'S INSURANCE COMPANY,
APPELLANT
vs.
JEANETTE HOBBS SMITH, INDIVIDUALLY AND AS
REPRESENTATIVE OF THE ESTATE OF
SILAS HOWARD SMITH, DECEASED,
APPELLEE
FROM THE DISTRICT COURT OF BELL COUNTY, 169TH JUDICIAL DISTRICT
NO. 121,072-C, HONORABLE STANTON B. PEMBERTON, JUDGE PRESIDING
This appeal involves the late filing of a claim by Jeanette Hobbs Smith for workers'
compensation death benefits. Following a jury trial, the district court rendered judgment against
the carrier, Providence Lloyd's Insurance Company. We will affirm the judgment of the trial
court.
BACKGROUND
On January 11, 1986, Silas Howard Smith, while attending a seminar in the course
of his employment, fell to the ground, striking and injuring his knee. Later that day he was taken
to the hospital emergency room, where, to relieve Mr. Smith's pain, the attending physician
prescribed Tylenol containing codeine, even though both Mr. and Mrs. Smith informed the doctor
that he could not take codeine. The next day Mr. Smith began vomiting and grew weaker; his
personal physician admitted him into the hospital where he died two weeks later. The jury found
that the work-related injury and subsequent medical care caused Mr. Smith's death and this
finding is not disputed on appeal.
Providence Lloyd's instead attacks the legal and factual sufficiency of the evidence
to support the jury's finding that Mrs. Smith had good cause for delay in filing a claim with the
Industrial Accident Board (IAB). Evidence at trial suggested that Mrs. Smith had relied on
assurances by officers of S.P.J.S.T., the fraternal life insurance company and benevolent society
which employed her husband, that they were taking care of the filing of the workers'
compensation claim. The jury apparently believed that Mrs. Smith acted reasonably in her
reliance on these statements, and the district court entered judgment for Mrs. Smith.
DISCUSSION
I. LEGAL SUFFICIENCY
In its first point of error, Providence Lloyd's attacks the legal sufficiency of the
evidence to support the finding that Mrs. Smith had good cause for delay. When reviewing legal
sufficiency points of error, we must consider only the evidence and inferences tending to support
the finding, and disregard all evidence and inferences to the contrary. Alm v. Aluminum Co. of
America, 717 S.W.2d 588, 593 (Tex. 1986).
It is well settled in Texas that an employer's representation that the claim is being
handled can excuse an employee's failure to timely file a workers' compensation claim. See Lee
v. Houston Fire and Casualty Ins. Co., 530 S.W.2d 294, 296 (Tex. 1975), and Texas Employer's
Insurance Association v. Herron, 569 S.W.2d 549, 554 (Tex. Civ. App. 1978, writ ref'd n.r.e.).
However, the sole test for permissible delay in filing a workers' compensation claim remains
whether the claimant acted as a reasonably prudent person would have under the circumstances.
Texas Casualty Ins. Co. v. Beasley, 391 S.W.2d 33 (Tex. 1965). Generally, a one-time
representation by the employer that the claim will be taken care of is not sufficient to make
inaction on the part of the claimant reasonable. See Consolidated Casualty Ins. Co. v. Perkins,
279 S.W.2d 299 (Tex. 1955), and Texas Employer's Ins. Ass'n v. Coronado, 519 S.W.2d 517
(Tex. Civ. App. 1975, writ ref'd n.r.e.). But cf. Standard Fire Ins. Co. v. Morgan, 745 S.W.2d
310, 311 (Tex. 1987).
The relevant question in this case is whether a reasonably prudent person in Mrs.
Smith's position would have remained inactive in reliance on the representations by the officers
of S.P.J.S.T. Coronado, 519 S.W.2d at 519. Mrs. Smith testified that she was assured
repeatedly by Bernie Gebala, the vice-president of S.P.J.S.T., that "everything would be taken
care of." Mrs. Smith further testified that she believed that when Gebala said "everything" this
included the workers' compensation claim, and since this is a legal sufficiency point of error we
must accept Mrs. Smith's reasonable interpretation of their conversations. See Morgan, 745
S.W.2d at 311 (the jury found that the claimant's inaction was reasonable based solely on the
claimant's own testimony that her employer promised that "everything would be taken care of").
The fact that Gebala was a close personal friend of the Smiths enhances the reasonableness of her
reliance on his reassurances. See Lee, 530 S.W.2d at 296.
Additionally, several months after her husband's death, Mrs. Smith visited the
offices of S.P.J.S.T. to check on some of her husband's affairs, including the workers'
compensation claim. She spoke with Leonard Mikeska, the S.P.J.S.T. officer in charge of
workers' compensation, and according to Mrs. Smith, he stated specifically that he had filed the
claim. This evidence is sufficient to overcome the distinction made in some cases between
promised future action by an employer and a bald factual statement that the claim has already been
filed. These cases suggest that a promise of future action alone should not completely reassure
the reasonably prudent person. Compare Bray v. Texas Employer's Insurance Ass'n, 483 S.W.2d
907 (Tex. Civ. App. 1972, writ ref'd n.r.e.) (mere promise of future action insufficient) with
Morgan, 745 S.W.2d 310 (promise of future action was sufficient under the circumstances).
There is, therefore, more than a scintilla of evidence suggesting that a reasonably prudent person
would have relied on the statements made by the officers of S.P.J.S.T.
Providence Lloyd's further attacks the legal sufficiency of the verdict by alleging
that any initial good cause that Mrs. Smith might have enjoyed evaporated either when she
received notice and claim forms from the IAB, or when she contacted her attorney, Ben Harvie,
about the potential workers' compensation claim. Even if the receipt of notice and claim forms
should have alerted Mrs. Smith to the need to file, her conversation with Mikeska, in which he
said that the claim had already been filed, came after receipt of the forms. This statement by
Mikeska, along with Gebala's frequent if broadly phrased assurances, supports the jury's apparent
conclusion that Mrs. Smith reasonably believed that she had no affirmative duty to file.
Providence Lloyd's next argues that any good cause for delay could not exist after
September 1986 when Mrs. Smith first discussed the workers' compensation claim with her
attorney, Ben Harvie. In a meeting held to discuss a medical malpractice claim arising out of Mr.
Smith's death, the topic of workers' compensation arose when Harvie advised Mrs. Smith that she
might also have such a claim. Mrs. Smith, however, told Harvie that S.P.J.S.T. was handling
the claim for her, and Harvie apparently did not force the issue because he believed Mrs. Smith's
statement and because the claim was not adversarial in nature at that time.
Providence Lloyd's also contends that at the very latest, once Mrs. Smith employed
Harvie to represent her in the matter of the workers' compensation claim, any good cause for
delay that she previously enjoyed ended at that time. They argue that the two and one-half months
that Harvie took to file the claim was an unreasonable period of time, and the letter by which
Harvie notified the IAB of the claim was insufficient for that purpose. We disagree.
Mrs. Smith's suspicions were first aroused when she inadvertently received a copy
of the employer's report to the IAB filed by S.P.J.S.T. This report contained factual statements
about how Mr. Smith hurt his knee which Mrs. Smith did not agree with and she therefore
employed Harvie to investigate the matter on September 3, 1987. Harvie personally contacted
the IAB and, on November 19, 1987, he followed up the call with a letter to the Board asking for
copies of the documentation already in the file. That letter, read in the light most favorable to the
jury's finding, suggests that Ben Harvie still believed that the claim had already been filed. The
IAB responded with a letter dated February 8, 1988, in which they notified Harvie that the
employer had controverted the case. The IAB also enclosed forms for filing a claim, which Mrs.
Smith and Harvie filled out and returned by February 12, 1987, four days later.
The record contains some evidence, therefore, that the post-attorney involvement
delay was reasonable for purposes of investigating, preparing, and filing the claim. Texas
Employer's Ins. Ass'n v. Brantley, 402 S.W.2d 140 (Tex. 1966). The question of whether
Harvie's original letter of inquiry to the IAB was sufficient to constitute notice is irrelevant given
Mrs. Smith's and Harvie's belief that a claim had already been filed. Harvie's letter, in fact,
speaks of the claim as having been filed and only requests forms for indicating that Harvie would
be representing Mrs. Smith in any further action on the matter.
We conclude, therefore, that the record contains sufficient evidence to support the
jury's finding that Mrs. Smith had good cause for delay in filing the workers' compensation claim
resulting from the death of her husband. Accordingly, we overrule Providence Lloyds' legal
sufficiency point of error.
II. FACTUAL SUFFICIENCY
In its second point of error, Providence Lloyd's attacks the factual sufficiency of
the evidence to support the jury's finding that Mrs. Smith had good cause for delay. In ruling on
this point, we must consider all of the evidence and set aside the judgment only if it is so contrary
to the overwhelming weight of the evidence as to be clearly wrong and unjust. Cain v. Bain, 709
S.W.2d 175, 176 (Tex. 1986).
The evidence introduced by the defendants at trial is, at best, weak. At no time
during his testimony did Gebala deny having had frequent contact with Mrs. Smith after her
husband's death, nor did he deny reassuring her in broad terms. Furthermore, the testimony of
both Mrs. Smith and Bernie Gebala demonstrates the depth of the friendship that had existed
between them. Gebala wrote the eulogy for Mr. Smith's funeral, and in a letter to Mrs. Smith
he called himself a lifelong friend. Nor does the testimony of Mikeska refute Mrs. Smith's
testimony that he told her that a claim had been filed.
Much is made by Providence Lloyd's of a letter written by Mrs. Smith and
addressed to Gebala. In the letter she claims that she felt betrayed by Gebala because of
statements he made in answer to a request by her attorney regarding the medical malpractice
claim. Providence Lloyd's suggests that if she did feel betrayed by these statements she could not
have continued to reasonably rely on Gebala's assurances, which did continue even after she wrote
the letter. However, Mrs. Smith's sense of betrayal by Gebala in this matter does not necessarily
suggest that she should have discontinued her trust in Mikeska's previous statement that the claim
had in fact been filed, nor does it mean that she necessarily could not trust Gebala, a self-professed lifelong friend, on any other matter. Moreover, the frequent phone conversations
continued between Mrs. Smith and Gebala, and Gebala wrote a letter to Mrs. Smith in which he
again reassured her that he was treating her as fairly as he could.
Competent evidence of probative force exists in the record to support the conclusion
that Mrs. Smith reasonably believed the representations by officers of S.P.J.S.T. that they were
taking care of her claim. The appellant has produced no evidence which casts any real doubt on
this contention. Accordingly, we overrule Providence Lloyd's factual sufficiency point of error,
and affirm the judgment of the trial court.
Jimmy Carroll, Chief Justice
[Before Chief Justice Carroll, Justices Aboussie and B. A. Smith]
Affirmed
Filed: April 8, 1992
[Publish] | 01-03-2023 | 09-05-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1543609/ | 11 F.2d 474 (1926)
HOME LIFE INS. CO.
v.
SIPP.
No. 3351.
Circuit Court of Appeals, Third Circuit.
March 12, 1926.
*475 Joseph L. Kun, of Philadelphia, Pa., and S. J. Rosenblum and Robert Carey, both of New York City, for plaintiff in error.
Holman & Buchanan (Susan Brandeis, of New York City, of counsel), for defendant in error.
Before BUFFINGTON, WOOLLEY, and DAVIS, Circuit Judges.
WOOLLEY, Circuit Judge.
Katharine V. Sipp, the plaintiff, brought this suit, as beneficiary, against the Home Life Insurance Company, the defendant, to recover $3,000, together with interest and costs, on a policy insuring the life of her mother. The defendant pleaded to the merits and (informally, yet certainly) interposed a counterclaim for money loaned on the policy, which, being unpaid, it claimed is deductible from any sum that might be found due. At the trial the defendant made a motion to dismiss the suit for want of jurisdiction, based on section 24 of the Judicial Code (Comp. St. § 991) which confers on district courts jurisdiction "where the matter in controversy exceeds, exclusive of interest and costs, the sum or value of $3,000," and on section 37 of the Judicial Code (Comp. St. § 1019), which directs that, "if in any suit commenced in a District Court * * * it shall appear * * * at any time after such suit has been brought * * * that such suit does not really and substantially involve a dispute or controversy properly within the jurisdiction of said District Court, * * * the said District Court shall proceed no further therein, but shall dismiss the suit." On denying the motion the learned trial court first thought the plaintiff's claim in the even amount of $3,000 came within the jurisdictional limitation but later took the position, and so charged the jury, that inasmuch as the death of the insured occurred in March, 1919, and suit was brought in October of that year, interest on the principal sum which had accrued between those dates should be treated as principal and be added to the amount named in the policy, and that, together, they exceed the sum of $3,000. Being not entirely satisfied with this ruling in her favor, the plaintiff filed an amendment to her statement, raising her claim to $3,159 by adding to the amount of insurance the unearned premium from the date of the death of the insured to the end of the year for which the premium had been paid. On jurisdiction thus found, the court submitted the case and the plaintiff had a verdict. To the judgment which followed, this writ of error is directed. Passing by many assignments of error, we come directly to the basic one raising the question whether on the pleadings and evidence the plaintiff brought her case within the jurisdiction of the District Court.
Construing literally the provision of the statute which gives jurisdiction to district courts "where the matter in controversy exceeds, exclusive of interest and costs, the sum or value of $3,000," we hold, of course, that the sum of $3,000 can never be in excess of itself, and that as the jurisdictional amount is reckoned exclusive of interest, an item of interest growing due after the due date of the principal cannot be added to swell the claim and bring it within the statute. Kaufman v. Rheinstrom (C. C.) 188 F. 544; Lazensky v. Supreme Lodge (C. C.) 32 F. 417; Smith v. Greenhow, 3 S. Ct. 421, 109 U. S. 671, 27 L. Ed. 1080; Gilson v. Mutual Reserve (C. C.) 129 F. 1003; Home v. Ray, 69 F. 697; Greene v. Kortrecht, 81 F. 241, 26 C. C. A. 381 (C. C. A. 5th); Moore v. Town of Edgefield (C. C.) 32 F. 498. Moreover, the part of the premium covering the period between the death of the insured and the end of the premium year is not available to raise the amount for the reason, first, that when insurance, as here, is for a specified term year by year and where, as here, the premium is paid annually, the premium is earned the instant the risk attaches and is not returnable thereafter, 3 Joyce, Insurance, 2618, § 1420; and, if this is not the law, second, that the unearned part of the premium, if repayable, can not be recovered by the plaintiff beneficiary but will go to the estate of the insured. Jefferson Standard Life Ins. Co. v. McIntyre, 294 F. 886, 888 (C. C. A. 5th).
Finally, the plaintiff maintains that her case is within the jurisdictional amount because of two ways in which the law regards a counterclaim: First, that a defendant who pleads a counterclaim is estopped to deny the jurisdiction of the court on the ground that the amount in dispute is insufficient; and next, that the amount of the counterclaim may be added to the amount of the principal claim and that, when together they exceed the sum of $3,000, the statute is satisfied. In support of the first proposition the plaintiff relies on O. J. Lewis Mercantile Co. v. Klepner, 176 F. 344, 100 C. C. A. 285 (C. C. A. 2d). True the court in that case announced the law as stated and gave as authority Merchants' Heat & Light Co. v. Clow & Sons, *476 27 S. Ct. 285, 204 U. S. 286, 289, 290, 51 L. Ed. 488. We hesitate to follow the law of Mercantile Co. v. Klepner for the reason that the decision in Merchants' Co. v. Clow, on which it is based, does not, as we read the opinion, sustain it. The latter case concerned the validity of service on the defendant corporation. No other jurisdictional question was raised. The trial court sustained the service and required the defendant to appear and plead. In appearing, it saved the right on appeal to attack the jurisdiction of the court on the service; yet, in pleading, it set up a counterclaim and thus, as the Supreme Court said, "It became a plaintiff in its turn, invoked the jurisdiction of the court in the same action and by invoking submitted to it." What the defendant there did by filing a counterclaim was to submit itself to a court in a case over whose subject-matter the court had jurisdiction. Here we are concerned with the act of a party filing a counterclaim in a case where, because not within the statute, the court did not have jurisdiction of the subject-matter. A party may appear and plead and thereby cure a defective service, but it can not by filing a counterclaim give jurisdiction to a court when a statute denies it jurisdiction. In other words, a defendant's consent to the court's jurisdiction as to amount, signified by the filing of a counterclaim, can not confer jurisdiction, it is conferred by statute alone; and, similarly, the filing of the counterclaim does not estop the defendant from attacking the jurisdiction on that statutory ground.
On the second proposition courts have said that "when the jurisdictional amount is in question, the tendering of a counterclaim in an amount which in itself, or added to the amount claimed in the petition, makes up a sum equal to the amount necessary to the jurisdiction of this court, jurisdiction is established, whatever may be the state of the plaintiff's complaint." American Sheet & Tin Plate Co. v. Winzeler (D. C.) 227 F. 321, 324. The jurisdictional amount is determined, according to familiar law, not by what later is actually recovered but by what first is demanded and what the pleadings and proofs show as sustaining the good faith and validity of the demand. Peeler v. Lathrop, 48 F. 780, 1 C. C. A. 93; Stillwell-Bierce & Smith-Vaile Co. v. Williamston Oil & Fertilizer Co. (C. C.) 80 F. 68; O. J. Lewis Mercantile Co. v. Klepner, 176 F. 343, 345, 346, 100 C. C. A. 285 (C. C. A. 2d); Schunk v. Moline, Milbourne & Stoddart Co., 13 S. Ct. 416, 147 U. S. 500, 504, 37 L. Ed. 255; Pinel v. Pinel, 36 S. Ct. 416, 240 U. S. 294, 297, 60 L. Ed. 817.
The counterclaim in this case $423 is not in itself equal to the jurisdictional amount; nor when added to the amount of the plaintiff's demand does it raise the total to the amount the statute requires, for the reason that the counterclaim was pleaded not to recover anything from the plaintiff but merely to be deducted from any amount that might be found due the plaintiff, and particularly to be deducted from an amount which the defendant admits it owes. Joining the figures of the two claims does not make "the matter in controversy" exceed the amount named in the statute because if the counterclaim were ignored by the jury the plaintiff could at most recover the $3,000 sued for (exclusive of interest and costs), which would be just short of the amount necessary for the jurisdiction of the court. At no time and under no arrangement of the figures has the amount in controversy exceeded $3,000. That amount is either precisely $3,000 or something less. Thus it appears the interposition of the counterclaim as a credit claim and as an item to be deducted from the sum that might be found due the plaintiff did not augment the amount in controversy.
As that amount is less than what the statute requires to confer jurisdiction on the District Court, Banking Association v. Insurance Association, 102 U. S. 121, 26 L. Ed. 45, we are constrained to find error in the refusal to dismiss and, accordingly, reverse the judgment and award a new trial in conformity with this opinion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543627/ | 997 A.2d 673 (2010)
Kevin L. FOREHAND, Defendant Below, Appellant,
v.
STATE of Delaware, Plaintiff Below, Appellee.
No. 292, 2009.
Supreme Court of Delaware.
Submitted: April 28, 2010.
Decided: June 22, 2010.
Reargument Denied July 9, 2010.
*674 Joseph M. Leager, Jr., Esquire, Office of the Public Defender, Wilmington, Delaware, for Appellant.
Paul R. Wallace, Esquire and Elizabeth R. McFarlan, Esquire (argued), Department of Justice, Wilmington, Delaware, for Appellee.
Before STEELE, Chief Justice, HOLLAND, BERGER, JACOBS and RIDGELY, Justices, constituting the Court en Banc.
BERGER, Justice, for the majority:
In this appeal, we consider the constitutionality of a statute that classifies a "walk away" escape after conviction as a violent felony. Appellant was serving Level IV probation and failed to return to the Plummer Community Corrections Center after work. He was arrested one week later and returned to custody. For purposes of a constitutional analysis, the fact that appellant's escape did not involve violence is irrelevant. Statutes are presumptively valid, and will be upheld if there is any rational basis to support the legislature's classification. It is entirely reasonable to *675 label all escapes after conviction as violent felonies because the perpetrators are convicted criminals who may use violence to avoid apprehension by the police. Accordingly, we uphold the constitutionality of the classification and affirm.
Factual and Procedural Background
Kevin L. Forehand was arrested in March 2007 and indicted on charges of possession with intent to deliver crack cocaine, second degree assault, felony resisting arrest, and other drug related crimes. He was released after posting bail, but Forehand failed to appear at his arraignment. In May 2007 he was committed to prison in lieu of bail. In August 2007 Forehand pled guilty to second degree assault. He was immediately sentenced to 8 years at Level V, suspended after one year for four years at Level IV work release, suspended after 19 months for Level III supervision.
On September 1, 2008, Forehand was serving his Level IV probation at the Plummer Community Corrections Center. After work that day he failed to return to custody. The next morning a warrant was issued, and Forehand was apprehended on September 8, 2008. Forehand pled guilty to escape after conviction and was sentenced as an habitual offender to a minimum mandatory term of 8 years at Level V. This appeal followed.
Discussion
The relevant portion of Delaware's habitual offender statute provides that a person with three prior felony convictions may be declared an habitual criminal after being convicted of a fourth felony. The maximum sentence is life imprisonment, and, if the fourth felony is a "violent felony, as defined in § 4201(c)," the minimum sentence may not be less than the maximum sentence for that crime.[1] Forehand pled guilty to escape after conviction, which is defined as follows:
§ 1253. Escape after conviction; class B felony; class C felony; class D felony:
A person shall be guilty of escape after conviction if such person, after entering a plea of guilty or having been convicted by the court, escapes from a detention facility or other place having custody of such person....
Escape after conviction shall be a class D felony; provided, however, that if the defendant uses force or the threat of force against another person or possesses a deadly weapon at the time of escape, it shall be a class C felony. If the defendant inflicts injury upon another person during the escape or from the time of escape until such person is again in custody, it shall be a class B felony....
Felonies are denominated Class A through Class G, with Class A felonies being the most serious.[2] In addition, approximately 75 crimes, enumerated in § 4201(c), are "designated as violent felonies." Escape after conviction is included in the list. As a result, Forehand was sentenced as an habitual offender to 8 years at Level V.
Forehand seeks reversal of his sentence on two grounds. First, he argues that § 4201(c) is unconstitutional because there is no rational basis on which to classify a "walk away" escape as a violent felony. The Constitutions of both the United States and the State of Delaware protect against deprivations of "life, liberty, or property, without due process of law...."[3] A statute violates the guarantee *676 of substantive due process if it "manifests a patently arbitrary classification, utterly lacking in rational justification."[4] But the statute is presumed to be constitutional, and the burden is on Forehand to show that there are no "facts, either known or which could have been reasonably assumed, which afford[ ] support for the legislation."[5]
The habitual criminal statute, 11 Del. C. § 4214, subjects repeat felons to enhanced punishment. The extent of that enhanced punishment depends on the number and gravity of the habitual offender's prior crimes as well as the gravity of the crime for which the offender is being sentenced. The General Assembly designated certain crimes as "violent" felonies for purposes of enhanced sentencing. The listed felonies do not always involve violence, but they are dangerous crimes that place innocent people at risk of harm.[6] Escape after conviction, even in its most benign form, properly falls into that category. A convicted felon who fails to return to custody while on work release demonstrates, by his conduct, that it was a mistake to place him or her at that level of supervision. The assumption that such a criminal is safe to be in the community, likewise, is negated. An escaped convict must find a place to hide in order to avoid recapture, and it is reasonable to anticipate that a person in those circumstances might resort to violence or threats of violence.
Forehand also argues that his 8 year sentence violates the Eighth Amendment of the United States Constitution. In Crosby v. State,[7] this Court explained:
The Eighth Amendment of the United States Constitution limits the sentencing discretion under Delaware's habitual offender statute by prohibiting sentences that are greatly disproportionate to the conduct being punished. To determine whether a particular sentence is prohibited, this Court must undertake a threshold comparison of the crime committed and the sentence imposed. If such a comparison leads to an inference of gross disproportionality, then this Court must compare [Forehand's] sentence with other similar cases to determine whether the trial court acted out of step with sentencing norms.[8]
Crosby had been sentenced to life in prison (calculated at 45 years) after committing forgery in the second degree, a class G felony. This Court held that Crosby's sentence was the rare case where an habitual offender received a grossly disproportionate sentence. In doing so, the Court noted that a 10 year sentence (which had been requested by the State) would not be unconstitutional.
Forehand's Eighth Amendment claim fails at the outset, as a threshold comparison of the crime committed and the sentenced imposed does not lead to an inference of gross disproportionality. Forehand committed the crime of escape after conviction, a Class D felony. He did not just walk away from work release and return the next morning. Rather, he remained at large until the *677 police arrested him one week later. An 8 year prison sentence may be considered harsh, but it does not approach the grossly disproportionate standard required for Eighth Amendment protection.
Conclusion
Based on the foregoing, the judgment of the Superior Court is affirmed.
STEELE, Chief Justice, dissenting, with JACOBS, Justice, joining:
The General Assembly classified Class D Escape After Convictiona crime without any rational connection to violenceas a violent felony. As a result of this overbroad classification, Kevin Forehand faces a mandatory minimum sentence for failing to return to his residential halfway house. We would reverse and remand for resentencing and, therefore, dissent from the majority's decision affirming the Superior Court's judgment of conviction.
1. Habitual offenders face a mandatory minimum for violent felonies.
The habitual criminal sentencing statute, 11 Del. C. § 4201(a) subjects qualifying defendants (3 felony convictions) to possible life imprisonment for a "4th" felony conviction.[9] Under this statute, a sentencing judge may sentence an habitual criminal up to life in prison after the triggering "4th" felony. Section 4201(a) further limits judges' discretion by creating an additional minimum penalty for violent habitual criminals as 11 Del. C. § 4201(c) defines them.[10] For these qualifiers, the statute mandates that there be a minimum sentence equal to or exceeding the maximum sentence for that triggering felony.
Under this statutory scheme, the sentencing judge must sentence Forehand to at least eight years up to life imprisonment. Section 4201(a) eliminates, for an habitual criminal's sentencing, the maximum ceiling for Class D Escape which is eight years. If the General Assembly had not classified Class D Escape as a violent felony, the sentencing judge could exercise rational discretion proportionate to Forehand's actions up to life imprisonment. Because the General Assembly classified Class D Escape After Confinement as a "violent" felony regardless of the factual underlying circumstances, Forehand faces an eight year mandatory minimum sentence simply for failing to return to a halfway house.
2. All § 4201(c) felonies rationally relate to violenceexcept Class D Escape After Conviction.
The violent felonies listed in § 4201(c) include expressly violent crimes,[11] crimes rationally connected to violence or deadly *678 weapons,[12] and "Escape After Conviction"an offense decreed to be "violent" without regard to the facts underlying the offense.
a. Section 4201(c) lists violent and violence-related felonies.
We do not dispute that the General Assembly has a rational purpose for increasing the sentences of habitual criminals who commit expressly violent crimes. The mandatory minimum ensures that repeatedly violent criminals will be segregated from the community.
Nor do we dispute that the four classes of non-expressly violent crimesdrug distribution, sex trade, organized crime, and physical detainmentrationally relate to violence. Violence pervades the illicit drug and sex tradesjust as it once pervaded the Prohibition-era alcohol trade.[13] Section 4201(c) does not include drug possession crimes, but rather limits the attribution of violence to drug crimes related to distribution. Similarly, we accept that criminal organizations increase the likelihood of violence and often engage in violence to further their other interests. Crimes related to detainment, such as Kidnapping or Unlawful Imprisonment, imply or require physical control against the captive's will, which is consistent with the common sense definition of physical violence.
Class C and B Escape After Conviction by their very terms also require force, threats, or possession of a deadly weapon, all of which rationally relate to violence. Class D Escape, by contrast, requires "escape from a detention facility or other place having custody." That leads to the clear inference that the State will charge Escape C or Bbut not Escape Dif the defendant is armed, commits violence, or attempts a violent act. Escape D, therefore, excludes by its very terms direct violence, and would require truly extraordinary circumstances to result indirectly in actual or attempted violence. Classifying all Escape After Conviction offenses as violent, including Escape D, based solely on a remote possibility or potential for indirect violence, ignores the express terms, considered policy, and significant penalty resulting from a conviction for Escape After Conviction D under our violent habitual criminal sentencing statute. That legislative judgment mistakes the forest of reality for a leaf of possibility. A rational basis requires only a slight logical connection, but the infinitesimally tenuous connection required to uphold the legislative judgment that Escape D is a violent act, is tantamount to no connection at all.
Unlike the four classes of non-expressly violent crimes, we cannot rationally infer an inherent threat of violence from Escape D. Section 4201 should exclude Escape D, just as it has excluded nonviolent Burglary and mere drug possession. We find the General Assembly's decision to classify only those Burglary offenses where violence can reasonably be expected to be rational. We suspect that our penal code's division of Burglary offenses into separately defined statutory crimes facilitated that rational judgment. By contrast, Escape After Conviction does not divide the three Escape offenses into separately defined crimes within three different statutes. *679 The General Assembly, for whatever reason, chose to combine the three bases for violating the law into one "catch all" offenseEscape After Conviction. The gradation of offensive conduct is expressed only by penalty. The penalty increases as violent conduct first appears and then aggravates.
We suggest that, unlike Burglary, where the General Assembly rationally classified somebut not all burglariesas violent, no distinction appears for Escape After Conviction, because of the inclusive, non-segregated legislative expression of the offense. It may well be that the General Assembly inadvertently overlooked the gradation of the Escape After Conviction's degrees of culpability and listed them as one without focusing on the unintended consequences. Whether inadvertent or intentional, the classification of Escape After Conviction D as violent along with Escape B and C, both of which expressly contemplate violence, constitutes a sweeping and overbroad approach that cannot pass the rational scrutiny test. The media does not put the community on "high alert" when someone fails to report to Level IV work-release or to a residential halfway house. Nor do State Troopers scour the community, guns drawn, to recapture the fugitive. Escape D does not create fear of the danger of violence that escaping accompanied by a violent act or armed from Level IV or V facilities could plausibly create among the community and law enforcement. No one can conclude that classifying Escape After Conviction D as a violent crime is rational.
b. Section 1253 combines violent and nonviolent forms of Escape.
Section 4201(a) is a single paragraph that comprises three distinct circumstances constituting Escape After Conviction. Unlike the Burglary statutes, which divide each degree into a separate statutory offense, the Escape After Conviction statute specifies the three respective, felonious levels of criminal conduct, but omits degrees, within a single section. The General Assembly has concluded that even nonviolent Escape, a crime that the defense alleges the State most frequently charges for failure to report for work or curfew, warrants a D-class felony penalty. It is not within our purview to challenge that judgment. However, because the General Assembly did not divide Escape into degrees, as it has done with burglary, violent Escape, B and C and nonviolent D are all subsumed within the rubric of Escape After Conviction in § 4201. This irrational joining of these three offenses as if they were one raises a constitutional issue with which we must unavoidably grapple.
The State has created halfway houses and community assimilation programs for individuals, such as Forehand, that it deems non-threatening. The community, penal system and the convicted criminal benefit from these programs. Although it is theoretically possible that the State would prosecute an individual for Escape D from a Level V facility, those instances not involving violence are unlikely. Rather, Escape D, generally and in actual practice applies to failure to report for work or a missed curfew. Here, Forehand did not commit a mere technical violation by missing his curfew by a few minutes; rather he seriously breached the trust of his supervisors. The General Assembly has connected serious, felonious accountability to the mutually beneficial work-release and halfway residential programs. We recognize the General Assembly's unfettered right to do so. Forehand shouldand willface serious penalties for his felonious conduct as an habitual criminal. The real question is whether these penalties should be enhanced on the theory that the offense is one that involves violence.
*680 Forehand did not commit a violent crime, nor was he charged with one. The State and its experts investigated and monitored Forehand before deciding that he should be transferred to a Level IV facility and be released for work. That decision assumes that they did not expect him to violently threaten the community. The State determined a low probability that Forehand would act violently, and in fact he never did. The General Assembly could not rationally penalize Forehand as if he had been violent on the fallacious assumption that he might have been violent. That falsely implies that he posed a rational threat of violencea threat that the State rejected by placing him in the halfway house in the first instance. An enhanced minimum mandatory habitual offender penalty, based on non-exhibited "violent" conduct, would serve neither retributive nor preventative justice.
As the Supreme Court of the United States recently observed, "[t]he heart of the retribution rationale is that a criminal sentence must be directly related to the personal culpability of the criminal offender."[14] Clearly a violent crime lacks a direct relationship to a crime that is neither violent nor related to violence. This sentencing scheme, therefore, does not properly condemn the offender or morally rebalance the community.[15] As the U.S. Supreme Court also discussed in Graham, a penalty's preventative effect may justify a reasonably harsh sentence.[16] Because Forehand's actions that breached Class D Escape After Conviction were not "violent" and Corrections placed him in a class of non-threatening convicted criminals, penalties for violent conduct will not affect his behavior. Thus, including Escape D in § 4201 fails to prevent the conduct intended to be covered by Escape D.
3. Section 4201(c) creates an overbroad class of `violent' felonies.
The Supreme Court of the United States has held that a legislative irrefutable presumption that is at odds with real world facts creates an unconstitutionally overbroad classification.[17] The State argued that we may not review the General Assembly's decision to classify a nonviolent crime as a violent crime. This legislative presumption here characterizes nonviolent conduct as violent conduct, and withers under constitutional scrutiny.
In Sugarman v. Dougall, the Court struck down a New York law requiring citizenship for competitive civil service jobs. It held that the "citizenship restriction sweeps indiscriminately" and fails to meet rational basis scrutiny.[18] Justice Blackmun wrote that the state "proves both too much and too little," in that the restriction "applies to many positions with respect to which the State's proffered justification has little, if any, relationship."[19]
In this instance, the Delaware General Assembly has also cast a wide, but thin net for sentencing the nameless sea of habitual *681 criminals. Like aliens in New York, these individuals have limited rights and representation, but still have undeniable Constitutional protections. The Constitution proscribes overbroad, irrefutable presumptions precisely to prevent the State from irrationally declaring that one plus one is three, or that nonviolent conduct is violent conduct. As Forehand's case demonstrates, this classification has an irrational connection to the actual conduct and significant consequences for sentencing.
For these reasons, we would reverse and remand for resentencing; and, therefore, dissent.
NOTES
[1] 11 Del. C. § 4214(a).
[2] 11 Del. C. § 4205.
[3] U.S. Const. Amend V. See, also: U.S. Const. amend XIV; Del. C. Ann. Const. art. 1, § 9.
[4] Flemming v. Nestor, 363 U.S. 603, 611, 80 S.Ct. 1367, 4 L.Ed.2d 1435 (1960).
[5] DiStefano v. Watson, 566 A.2d 1, 7 (Del. 1989). See, also: Harrah Independent School District v. Martin, 440 U.S. 194, 198, 99 S.Ct. 1062, 59 L.Ed.2d 248 (1979).
[6] See: Williams v. State, 539 A.2d 164, 174 (Del. 1988) (General Assembly properly characterized a daytime residential burglary as a serious crime involving potential violence and danger to human life.).
[7] 824 A.2d 894 (Del.2003).
[8] Id. at 908 (Quotations and citations omitted.).
[9] 11 Del. C. § 4214(a). "Any person who has been 3 times convicted of a felony, other than those which are specifically mentioned in subsection (b) of this section, under the laws of this State, and/or any other state, United States or any territory of the United States, and who shall thereafter be convicted of a subsequent felony of this State is declared to be an habitual criminal, and the court in which such 4th or subsequent conviction is had, in imposing sentence, may in its discretion, impose a sentence of up to life imprisonment upon the person so convicted. Notwithstanding any provision of this title to the contrary, any person sentenced pursuant to this subsection shall receive a minimum sentence which shall not be less than the statutory maximum penalty provided elsewhere in this title for the 4th or subsequent felony which forms the basis of the State's petition to have the person declared to be an habitual criminal except that this minimum provision shall apply only when the 4th or subsequent felony is a Title 11 violent felony, as defined in § 4201(c) of this title...."
[10] See 11 Del. C. § 4201(c).
[11] See, e.g., 11 Del. C. § 612 Second Degree Assault; 11 Del. C. § 826 First Degree Burglary; 11 Del. C. § 1253 Class C Escape After Conviction.
[12] See, e.g., 11 Del. C. § 617 Criminal Youth Gangs; 11 Del. C. § 1108 Sexual Exploitation of a Child; 11 Del. C. § 782 First Degree Unlawful Imprisonment; 16 Del. C. § 4753A Trafficking in Marijuana, Cocaine, Illegal Drugs, Methamphetamine, LSD, Designer Drugs or MOMA.
[13] See Craig M. Bradley, Racketeering and the Federalization of Crime, 22 Am.Crim. L.Rev. 213, 228 (Fall 1984); Craig M. Bradley, Anti-Racketeering Legislation in America, 54 Am. Crim. L.Rev. 671, 676 (Fall 2006).
[14] Graham v. Florida, ___ U.S. ___, ___, 130 S.Ct. 2011, 176 L.Ed.2d 825 (2010) (quoting Tison v. Arizona, 481 U.S. 137, 149, 107 S.Ct. 1676, 95 L.Ed.2d 127 (1987)).
[15] Graham, ___ U.S. at ___, 130 S.Ct. 2011.
[16] See id.
[17] Haig v. Agee, 453 U.S. 280, 305, 101 S.Ct. 2766, 69 L.Ed.2d 640 (1981) (citing Aptheker v. Sec. of State, 378 U.S. 500, 511, 84 S.Ct. 1659, 12 L.Ed.2d 992 (1964)).
[18] 413 U.S. 634, 643, 93 S.Ct. 2842, 37 L.Ed.2d 853 (1973). Although the U.S. Supreme Court wrestled with the appropriate standard of "close scrutiny" to apply to alien discrimination cases, it required only a "showing of some rational relationship." Foley v. Connelie, 435 U.S. 291, 296, 98 S.Ct. 1067, 55 L.Ed.2d 287 (1978) (explaining the standard of review in Sugarman).
[19] Sugarman, 413 U.S. at 642, 93 S.Ct. 2842. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543630/ | 11 F.2d 873 (1926)
In re BARNET MFG. CO.
Petition of SILVERBERG BROS.
No. 35177.
District Court, D. Massachusetts.
February 24, 1926.
Thomas M. Vinson, of Boston, Mass., for Silverberg Bros.
Joseph L. Hermanson, of Boston, Mass., for trustee.
MORTON, District Judge.
The goods in question were bought by the bankrupt about July 20, 1925, and were delivered to it about August 1, 1925. The bankruptcy proceedings were instituted on September 17, 1925, following a common-law assignment on that date.
The referee has found against the claimant, and his findings must stand, unless plainly wrong on the facts, or based on some fundamentally erroneous view of the law. Neither of these is shown.
The misrepresentation relied on by the claimant as avoiding the sale consists of alleged oral statements by the manager of the bankrupt to the claimant that its net assets were from $20,000 to $30,000. There is a distinction between misstatements which enter into a contract and become part of it, and those which relate only to inducements to the contract.[1] As to the former a material misstatement, which is relied upon, avoids the contract, because the stated subject-matter or terms of it did not in fact exist. In such cases it is not necessary to show fraud. Misrepresentations of the latter sort stand on a different footing. They may relate to matters of much importance, but, not being part of the contract, it is not avoided by them, unless they were fraudulently made. Statements as to solvency and financial standing are of this character. They do not furnish a ground of rescission, unless shown to have been fraudulent. Going through the form of purchasing goods, while intending not to pay for them, is, of course, a fraud; and purchasing goods on credit, when the buyer knows that he cannot pay for them, amounts to the same thing. In re Siegel Co. (D. C.) 223 F. 369.
In this case the bankrupt had a statement from its books prepared by a public accountant, apparently for its own information, on or about August 13, 1925. It showed an equity in the business of about $13,000. In the schedules in bankruptcy the assets are given as $10,000, and the liabilities as $18,- *874 000. How this difference of about $21,000 came about is not satisfactorily explained. Some of it may be due to lower valuations of the merchandise on hand; but this hardly seems an adequate explanation for such a large difference. The statement of condition may have been in error; but, if so, the evidence does not show that the managers of the bankrupt were aware of that fact. The learned referee was not satisfied that they acted in bad faith in this transaction. Enough has been said to indicate that this finding cannot be set aside as plainly wrong. Indeed, upon the evidence reported, I should reach the same conclusion.
Without at all receding from the opinion, which I have several times expressed, that the purchase of goods on credit by a person who is deeply insolvent and knows it is presumptively fraudulent, I agree with the learned referee in thinking that the claimant has not made out such a case.
Order affirmed.
NOTES
[1] This distinction has sometimes been lost sight of, and there is conflict of authority. See Williston on Sales (2d Ed.) § 632. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543662/ | 318 Md. 200 (1989)
567 A.2d 449
STATE OF MARYLAND
v.
GLORIA CRUTCHFIELD.
No. 64, September Term, 1989.
Court of Appeals of Maryland.
December 28, 1989.
Valerie J. Smith, Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen., both on brief), Baltimore, for petitioner.
Benjamin Lipsitz (Jay Fred Cohen, Eleanor J. Lipsitz, all on brief), Baltimore, for respondent.
Argued before MURPHY, C.J., ELDRIDGE, COLE, RODOWSKY, McAULIFFE and ADKINS, JJ., and CHARLES E. ORTH, Jr., Retired, Specially Assigned Judge.
MURPHY, Chief Judge.
This case involves the sua sponte declaration of a mistrial by a trial judge in a criminal case and whether, in the circumstances, retrial of the defendant would violate the double jeopardy clause of the Fifth Amendment to the Federal Constitution, now applicable to the states through the Fourteenth Amendment under Benton v. Maryland, 395 U.S. 784, 89 S.Ct. 2056, 23 L.Ed.2d 707 (1969).[1]
I.
On January 17, 1987, the Maryland State Police responded to a call regarding a shooting at a home in Mt. Airy, Maryland. Trooper Douglas Wehland, the first to arrive at the scene, discovered Gloria Elizabeth Crutchfield on the porch of the residence; she implored Wehland to come to the shooting victim's aid. Crutchfield had blood on her skin and clothing. In response to Wehland's inquiry, she stated that she had shot a man, later identified as William Richard Lawrence. The victim was lying on the floor, bleeding. At no time during this period did Wehland advise Crutchfield of her rights under Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966).
Emergency medical personnel and other police officers thereafter arrived on the scene, among them Corporal Joseph Marick and Trooper Donald Lewis. Marick took two statements from Crutchfield without advising her of her Miranda rights. In the first statement, which was taken in the kitchen of the residence, Crutchfield told Marick that she and Lawrence argued because he had arrived home late; that she had turned up the thermostat to anger him; and that Lawrence then pulled her hair, struck her, picked up a knife and threatened her. In this statement, Crutchfield admitted that she took a handgun from her pocketbook, and that she and Lawrence struggled over the gun, which discharged toward the ceiling. Crutchfield told Marick that she then regained possession of the gun and, instead of shooting Lawrence in the arm as she intended to do, she shot him in the head. As part of this statement, Crutchfield said that when Lawrence was shot they were still struggling over the gun. In response to Marick's inquiry as to why she had a gun in her purse, Crutchfield said that she didn't know what kind of party she was going to and had it just in case.
Shortly after he took this statement, Marick took Crutchfield to his police cruiser where he asked her to once again relate the details of the shooting. Crutchfield told Marick that after she told Lawrence that she had turned up the thermostat, he went to the front room and knocked things over, after which he returned to the kitchen, pulled her hair and struck her. In this statement, Crutchfield said that she retrieved the gun from her pocketbook; that she struggled with Lawrence over the gun; and that Lawrence shot at her and missed. Crutchfield said that after she regained possession of the gun, she attempted to shoot Lawrence in the arm, but instead shot him in the head. Crutchfield told Marick that, at first, she thought Lawrence had feigned injury to get her attention or affection, but then she saw blood and tried to resuscitate him. She said that she called for emergency medical assistance. She also stated that Lawrence had beat her several times and that she was not going to let him beat her again.
After the two statements were taken by Marick, Trooper Lewis asked Crutchfield to consent to a collection of evidence from the house. She refused. Lewis then took Crutchfield to police headquarters to obtain her clothing as evidence. During the trip, Lewis advised Crutchfield of her Miranda rights and she gave another statement, wherein she related that she and Lawrence were to go to a car show that day; that he had been away from home all day, but called the residence approximately one hour before the shooting; and that from this conversation she thought he was high and may have been using P.C.P. During this conversation, Crutchfield told Lawrence that she was not going to wait for him but was going to a party. Crutchfield admitted to Lewis that before leaving, she went upstairs and took a .22 caliber revolver from a jewelry box and placed it in her purse, which she then placed on the kitchen table. In response to Lewis's questions, Crutchfield said that she took the pistol with her whenever she went out. According to her statement, Lawrence arrived at the residence before she left and the two argued. She told Lawrence that she had turned up the thermostat to 85 degrees, and that he became angry and "went off like a wild man." In this statement, she said that Lawrence struck her, pulled her hair and knocked her down; that her purse, which had been on the kitchen table, was knocked to the floor and the pistol came out of it; that she retrieved the gun, the two struggled over it, that it discharged into the air; and that the struggle continued. Lewis testified that in Crutchfield's statement to him, she said that "[s]he stepped back, ... cocked the gun, [and she] described very vividly how she had to cock the pistol, and ... when he lunged at her, she ... fired and shot him." Lawrence fell to the floor, after which Crutchfield said she called for medical assistance.
Crutchfield also told Lewis that at some point during the confrontation, Lawrence had what she thought was a steak knife. In response to Lewis's inquiry as to her state of mind when she shot Lawrence, Crutchfield said that she did not intend to kill him, but only to shoot him in the arm or the leg to slow him down and stop him from beating her. At that point Lewis asked Crutchfield about taking a taped statement. She asked to talk to someone before continuing. She later spoke to her father and thereafter declined to answer any further questions.
Crutchfield was subsequently indicted in the Circuit Court for Carroll County for first degree murder, second degree murder, manslaughter and use of a handgun in the commission of a felony. At a suppression hearing held on September 14, 1987, the court (Gilmore, J.) denied Crutchfield's motion to suppress her statements.
The case was removed to the Circuit Court for Garrett County where a jury trial began on February 29, 1988 before Chief Judge Frederick A. Thayer, III. Crutchfield again moved to suppress the statements she had made to the officers. In reliance on Judge Gilmore's denial of the motion at the earlier suppression hearing, Judge Thayer also denied the motion.
Upon the conclusion of Marick's testimony at the trial, the jury was excused and the trial was recessed. Judge Thayer called counsel into chambers and expressed concern that Crutchfield's statements to Marick had been improperly admitted in evidence. That evening Judge Thayer reviewed the transcript of the suppression hearing before Judge Gilmore, as well as the law governing the admissibility of statements given during custodial interrogation by police. The following morning Judge Thayer declared a mistrial, indicating for the record that Crutchfield neither consented nor objected to the mistrial. He found that Corporal Marick's testimony at trial "demonstrated that there was custodial interrogation of the defendant without prior Miranda advice" as to the statements made by Crutchfield to him in the residence and in the patrol car. Judge Thayer recognized from Marick's trial testimony that Judge Gilmore "had some bad information before him." In his sua sponte declaration of a mistrial, Judge Thayer said that the "only means of permitting ... [Crutchfield's trial] to begin again afresh" was to take this action, it being his belief that "it now would be a travesty to proceed to a conclusion in this case."
Crutchfield later moved to dismiss the indictment, claiming that the sua sponte declaration of the mistrial was not based on manifest necessity and violated the double jeopardy provision of the Constitution. Judge Thayer denied the motion.
Crutchfield filed an immediate appeal from Judge Thayer's order, as authorized by Neal v. State, 272 Md. 323, 322 A.2d 887 (1974). The Court of Special Appeals reversed, holding that Crutchfield's retrial was barred by double jeopardy principles because the mistrial was not based upon manifest necessity and Crutchfield did not consent to it. In so holding, the intermediate appellate court first recognized that the trial judge expressed "his belief that the damage done to [Crutchfield's] case by the admission of highly prejudicial evidence that should have been excluded was irreparable." Crutchfield v. State, 79 Md. App. 101, 103, 555 A.2d 1070 (1989). It noted that the two statements made to Marick were "extremely damaging to [Crutchfield] because they were inconsistent with her other statements and her self-defense theory of defense [and] had been made in response to interrogation while ... in custody and before she had been advised of her Miranda rights." Id. It further said that where a mistrial has been declared sua sponte by the trial judge without the defendant's explicit acquiescence, "retrial will not be barred if there was a manifest necessity for the mistrial; however, if the trial was needlessly aborted, retrial will be barred." Id. [79 Md. App.] at 105, 555 A.2d 1070. As to this, the court concluded that while "a great deal of deference must be given the trial judge's determination; ... great deference should be given [to the defendant's] determination as to whether his own interests would be better served by aborting the trial or by submitting his fate to the jury that is already impaneled." Id. [79 Md. App.] at 107, 555 A.2d 1070. The court held that "except in the most extraordinary circumstances, that decision should be left to the defendant, not the judge." Id.
The intermediate appellate court recognized that "the error was the admission of evidence, prejudicial to the defendant, that should have been excluded." Id. [79 Md. App.] at 108, 555 A.2d 1070. It queried whether the error was curable "by striking out the evidence and instructing the jury to disregard it." Id. [79 Md. App.] at 108, 555 A.2d 1070. In this regard, it said that there is a presumption that a jury can and will follow curative instructions when they are given. At the same time, the court also recognized that "it would be reversible error to admit into evidence an involuntary confession ... with the expectation that a curative instruction will negate the harm." Id. [79 Md. App.] at 109, 555 A.2d 1070. Nevertheless, the court reasoned that the trial judge "may not decide as a matter of law, over the defendant's objection or without his consent, that the harm is incurable." Id. It explained:
"The defendant may believe that no substantial harm has been done; he may believe that a curative instruction would alleviate the harm; or he may believe that continuing the case before the jury already impanelled, if that jury is properly instructed, is a benefit that would outweigh any residual harm. If the defendant declines to move for a mistrial, choosing to continue the case before the impanelled jury, to which a curative instruction has been given, the error in admitting the evidence will not necessitate a reversal; it will be deemed to be either cured or waived." Id.
The court concluded its opinion with these words:
"[T]his case is one in which the trial judge, upon concluding that damaging statements which had been admitted into evidence should have been excluded, took it upon himself to declare a mistrial sua sponte in order to protect the rights of a defendant who did not seek or consent to that protection. There being nothing in the record indicating a manifest, i.e., palpable, evident, obvious, clear, plain, or patent, necessity for the trial judge to have aborted the trial, a retrial of appellant is barred by the Double Jeopardy Clause of the Fifth Amendment...." Id. [79 Md. App.] at 109-10, 555 A.2d 1070 (emphasis in original).
We granted certiorari upon the State's petition to determine whether the Court of Special Appeals erred in reversing Judge Thayer's denial of Crutchfield's motion to dismiss the indictment.
II.
Judge Eldridge, writing for the Court in Cornish v. State, 272 Md. 312, 322 A.2d 880 (1974), reviewed relevant Supreme Court cases governing the application of the Fifth Amendment's double jeopardy clause to a retrial following the declaration of a mistrial. United States v. Perez, 22 U.S. (9 Wheat.) 579, 6 L.Ed. 165 (1824), the seminal Supreme Court decision in this regard, explained [22 U.S. (9 Wheat)] at 580:
"[I]n all cases of this nature, the law has invested Courts of justice with the authority to discharge a jury from giving any verdict, whenever, in their opinion, taking all the circumstances into consideration, there is a manifest necessity for the act, or the ends of public justice would otherwise be defeated. They are to exercise a sound discretion on the subject; and it is impossible to define all the circumstances, which would render it proper to interfere. To be sure, the power ought to be used with the greatest caution, under urgent circumstances, and for very plain and obvious causes.... [Courts] have the right to order the discharge; and the security which the public have for the faithful, sound, and conscientious exercise of this discretion, rests, in this, as in other cases, upon the responsibility of the Judges, under their oaths of office." (Emphasis supplied.)
See also Richardson v. United States, 468 U.S. 317, 323-34, 104 S.Ct. 3081, 3084-91, 82 L.Ed.2d 242 (1984); Oregon v. Kennedy, 456 U.S. 667, 672, 102 S.Ct. 2083, 2087, 72 L.Ed.2d 416 (1982); Arizona v. Washington, 434 U.S. 497, 505-06, 98 S.Ct. 824, 830, 54 L.Ed.2d 717 (1978); Illinois v. Somerville, 410 U.S. 458, 461-62, 93 S.Ct. 1066, 1069, 35 L.Ed.2d 425 (1973); Cornish v. State, supra, 272 Md. at 316-17, 322 A.2d 880. In Arizona v. Washington, supra, 434 U.S. at 506, 98 S.Ct. at 830, the Supreme Court said that the
"classic formulation of the [manifest necessity] test has been quoted over and over again to provide guidance in the decision of a wide variety of cases. Nevertheless, those words do not describe a standard that can be applied mechanically or without attention to the particular problem confronting the trial judge. Indeed, it is manifest that the key word `necessity' cannot be interpreted literally; instead, contrary to the teaching of Webster, we assume that there are degrees of necessity and we require a `high degree' before concluding that a mistrial is appropriate."
The Supreme Court has not fashioned any hard and fast rules for determining when manifest necessity exists; rather, it has "explicitly declined the invitations of litigants to formulate rules based on categories of circumstances which will permit or preclude retrial." U.S. v. Jorn, 400 U.S. 470, 480, 91 S.Ct. 547, 554, 27 L.Ed.2d 543 (1971). Additionally, the manifest necessity standard "abjures the application of any mechanical formula by which to judge the propriety of declaring a mistrial in the varying and often unique situations arising during the course of a criminal trial." Illinois v. Somerville, supra, 410 U.S. at 462, 93 S.Ct. at 1069.
We recognized in Cornish, 272 Md. at 318, 322 A.2d 880, that the Supreme Court has established broad principles to be followed in determining whether there was manifest necessity for a mistrial. See also Jourdan v. State, 275 Md. 495, 510, 341 A.2d 388 (1975). At one extreme are the mistrials that are not based upon manifest necessity and have been declared to give prosecutors an unfair advantage over the defendant. Arizona v. Washington, supra, 434 U.S. at 507-08, 98 S.Ct. at 831; In Re Mark R., 294 Md. 244, 250-51, 449 A.2d 393 (1982). At the other extreme is the hung jury, considered to be the classic example of what constitutes manifest necessity for a mistrial. See Arizona v. Washington, supra, 434 U.S. at 509, 98 S.Ct. at 832; In Re Mark R., 294 Md. at 250-51, 449 A.2d 393; see also, e.g., Keerl v. Montana, 213 U.S. 135, 29 S.Ct. 469, 53 L.Ed. 734 (1909); Dreyer v. Illinois, 187 U.S. 71, 23 S.Ct. 28, 47 L.Ed. 79 (1902); Logan v. United States, 144 U.S. 263, 12 S.Ct. 617, 36 L.Ed. 429 (1892); United States v. Perez, supra, 22 U.S. (9 Wheat.) 579, 6 L.Ed. 165.
There is a wealth of case law that has fleshed out the spectrum between these two extremes. Manifest necessity exists where there has been a procedural error in the proceedings which would necessitate a reversal on appeal. Illinois v. Somerville, supra, 410 U.S. at 464, 93 S.Ct. at 1070. The Supreme Court has also found manifest necessity for a mistrial where a juror has possibly been biased or the juror's impartiality is questionable. Thompson v. United States, 155 U.S. 271, 15 S.Ct. 73, 39 L.Ed. 146 (1894) (one of the trial jurors served on the grand jury that indicted the defendant); Simmons v. United States, 142 U.S. 148, 12 S.Ct. 171, 35 L.Ed. 968 (1891) (possible juror bias as result of a newspaper article about a letter written by defense counsel which denied that one of the jurors was acquainted with the defendant). Manifest necessity does not exist where a prosecution witness is absent or where the mistrial is declared "so as to afford the prosecution a more favorable opportunity to convict...." Downum v. United States, 372 U.S. 734, 736, 83 S.Ct. 1033, 1034, 10 L.Ed.2d 100 (1963). In Jourdan v. State, supra, we held that there was no manifest necessity for a sua sponte declaration of a mistrial where the prosecuting attorney became ill during the trial and a short continuance until another prosecutor could become prepared was a feasible alternative. Nor does manifest necessity for a mistrial exist where the State's witness could not communicate in the English language and a short continuance to obtain an interpreter would have solved the problem.[2]In Re Mark R., supra.
In this case, it was the improper admission of highly damaging evidence that prompted Judge Thayer to declare a mistrial. A brief analysis of the cases where prejudicial evidence was improperly admitted, or counsel made improper remarks or arguments, demonstrates that the case before us is well within the category of cases in which a mistrial is manifestly necessary.
In Arizona v. Washington, supra, defense counsel made improper remarks in his opening statement to the jury regarding evidence that the prosecutor withheld from the defendant. The Supreme Court began its analysis "from the premise that defense counsel's comment was improper and may have affected the impartiality of the jury." 434 U.S. at 511, 98 S.Ct. at 833 (emphasis supplied). It "recognize[d] that the extent of possible bias cannot be measured," and that it was entirely possible "that some trial judges might have proceeded with the trial after giving the jury appropriate cautionary instructions." Id. Continuing, the Court said that
"[i]n a strict, literal sense, the mistrial was not `necessary.' Nevertheless, the overriding interest in the evenhanded administration of justice requires that we accord the highest degree of respect to the trial judge's evaluation of the likelihood that the impartiality of one or more jurors may have been affected by the improper comment." Id.
In the instant case, the improperly admitted statements likely had a more severe impact upon the jury than the improper comment made to the jury in Arizona v. Washington. Here, as in that case, the "highest degree of respect" must be given to Judge Thayer's evaluation of the effect of the improperly admitted statements upon the jury.
In Cornish, we held that manifest necessity for a mistrial existed where the prosecutor made a prejudicial remark during a nonjury murder trial (which the judge concluded would be very difficult for her to disregard) and the trial judge concluded that a continuance would not be practical.
In Neal v. State, supra, we affirmed the circuit court's denial of a motion to dismiss a warrant charging the defendant with shoplifting. There, a mistrial was declared because articles allegedly stolen by the defendant, which were suppressed as fruits of a warrantless search, were within sight of the jury for the entire trial and were repeatedly referred to throughout the trial.
Courts in other states have found manifest necessity for sua sponte mistrials in similar cases. The Supreme Court of Delaware, in Bailey v. State, 521 A.2d 1069 (Del. 1987), found manifest necessity to exist in a trial judge's sua sponte declaration of a mistrial where prosecution witnesses referred to the defendant's prior trial on the same charges and a third prosecution witness referred to the prior trial and the resulting conviction. In an earlier case, Rentoul v. State, 301 A.2d 284 (Del. 1973), the court also found manifest necessity for a mistrial where the prosecutor and defense counsel made improper remarks in their opening statements. The trial judge, sua sponte, declared a mistrial after the prosecutor stated that a blood alcohol test could not be introduced as evidence because it was defective as the result of an insufficient breath sample, and defense counsel alleged that exculpatory evidence was being suppressed by the state.
In Abdi v. State, 249 Ga. 827, 294 S.E.2d 506 (1982), the court found manifest necessity for a mistrial in a rape case when defense counsel questioned the complaining witness regarding her sexual experience. The prosecutor objected to the question under the Georgia "shield law" and moved that defense counsel be rebuked, at which time the trial judge, sua sponte, declared a mistrial without objection from the defendant.
Manifest necessity for a mistrial was found by the court in State v. Brady, 120 N.H. 899, 424 A.2d 407 (1980). In that case the trial judge declared a sua sponte mistrial after finding one of the defendants in contempt of court for stating "that the trial was `reminiscent of a kangaroo court.'" Id. 424 A.2d at 408-09. The appellate court thought the trial judge's discretion was properly exercised because the defendant's "obvious hostility to the judge's rulings could not help but influence the jury." Id. 424 A.2d at 409.
In State v. Blanks, 190 N.J. Super. 269, 463 A.2d 359 (1983), the court held that the trial judge had correctly declared a mistrial based on manifest necessity where a witness who had allegedly participated in the crime with the defendant stated that he had been found not guilty in a prior separate trial. There, the trial judge concluded that a curative instruction would be insufficient.
Courts that have not found manifest necessity for sua sponte mistrials have had very different facts before them. In People v. Benton, 402 Mich. 47, 260 N.W.2d 77 (1977), the court held that there was no manifest necessity for the declaration of a mistrial where the prosecutor improperly impeached his own witness who allegedly was an accomplice of the defendant in an armed robbery. In Klinefelter v. Superior Court, County of Maricopa, 108 Ariz. 494, 502 P.2d 531 (1972), the court held that there was no manifest necessity for the declaration of a mistrial in an aggravated battery case because a rebuttal witness twice referred to information which had been excluded as improper rebuttal testimony. In Espinoza v. District Court In & For County of Conejos, 180 Colo. 391, 506 P.2d 131 (1973), the court held that there was no manifest necessity for a sua sponte mistrial over the prosecutor's objection where the defense attorney's cross-examination of an alleged rape victim and closing argument before a jury, were "either completely proper or involved at most only minor improprieties." Id. 506 P.2d at 134. In District of Columbia v. I.P., 335 A.2d 224 (D.C. 1975), the court found no manifest necessity for a sua sponte mistrial where the trial judge recused himself because he believed that the prosecutor was attempting to withhold evidence.
In Jones v. State, 17 Md. App. 504, 302 A.2d 638 (1973), the court found no manifest necessity for the declaration of a mistrial merely because the trial judge believed he had incorrectly admitted evidence that an armed robbery suspect's victim was a drug dealer.
III.
We held in Cornish, 272 Md. at 320, 322 A.2d 880, that "a retrial is barred by the Fifth Amendment where reasonable alternatives to a mistrial, such as a continuance, are feasible and could cure the problem." We also stated in Neal v. State, supra, 272 Md. at 326, 322 A.2d 887, that "[t]he trial judge's function is to see that the defendant has a fair trial. Once he perceives that the trial cannot proceed because of prejudice to the defendant, he has no choice but to declare a mistrial."
Crutchfield argues that there were alternatives to a mistrial that Judge Thayer should have considered, mainly to strike the inadmissible evidence, give a curative instruction to the jury, and afford her the choice of either accepting the instruction or the mistrial. In the circumstances of this case, we think Judge Thayer was entitled to and did exercise sound discretion in rejecting this and other alternatives now suggested by Crutchfield. As the Supreme Court said in Illinois v. Somerville, supra, 410 U.S. at 464, 93 S.Ct. at 1070:
"A trial judge properly exercises his discretion to declare a mistrial if an impartial verdict cannot be reached, or if a verdict of conviction could be reached but would have to be reversed on appeal due to an obvious procedural error in the trial. If an error would make reversal on appeal a certainty, it would not serve `the ends of public justice' to require that the Government proceed with its proof when, if it succeeded before the jury, it would automatically be stripped of that success by an appellate court. This was substantially the situation in both Thompson v. United States, [155 U.S. 271, 15 S.Ct. 73, 39 L.Ed. 146 (1894)] and Lovato v. New Mexico, [242 U.S. 199, 37 S.Ct. 107, 61 L.Ed. 244 (1916)]."
As earlier indicated, the Court of Special Appeals recognized that it would be reversible error to admit Crutchfield's statements to Marick into evidence with the expectation that a curative instruction would negate the harm. 79 Md. App. at 109, 555 A.2d 1070. It nevertheless concluded, against the relevant case authority, that it was for the defendant, and not the trial judge, to make the ultimate determination of manifest necessity for a mistrial, including whether a curative instruction would alleviate the harm done by the improperly admitted evidence of Crutchfield's guilt. In so holding, the court in effect rendered the trial judge a useless appendage in the judgmental process of determining whether a mistrial was manifestly necessary in the interest of public justice. That Crutchfield may have been receptive to a curative instruction and thereby would possibly waive the evidentiary error on appeal if she was convicted, does not circumscribe the traditional power vested in the trial judge to declare, sua sponte, whether a mistrial must be granted on the basis of manifest necessity. And this is so without regard to the defendant's acquiescence or objection. In other words, the public interest is not served by rendering a trial judge powerless to act where a defendant, knowing that reversible error has been committed during the trial, does not consent to the mistrial, being secure in the belief that if the jury returns a verdict of guilty, the conviction will in any event be reversed on appeal. To permit such a result would fly in the face of Illinois v. Somerville, supra and would not accord "the highest degree of respect" to the trial judge's evaluation of the manifest need for a mistrial, as required by Arizona v. Washington, 434 U.S. at 511, 98 S.Ct. at 833. As the latter case states, 434 U.S. at 512-13, 98 S.Ct. at 833-34:
"The trial judge, of course, may instruct the jury to disregard the improper comment. In extreme cases, he may discipline counsel, or even remove him from the trial as he did in United States v. Dinitz, 424 U.S. 600 [96 S.Ct. 1075, 47 L.Ed.2d 267 (1976)]. Those actions, however, will not necessarily remove the risk of bias that may be created by improper argument. Unless unscrupulous defense counsel are to be allowed an unfair advantage, the trial judge must have the power to declare a mistrial in appropriate cases."
Judge Thayer explained his reasons for declaring the mistrial on the record. Although he did not make a specific finding of manifest necessity, the failure to do so does not render his declaration of the mistrial constitutionally defective. Arizona v. Washington, supra, 434 U.S. at 517, 98 S.Ct. at 836. From our review of the record, it is evident that Judge Thayer did not err in declaring the mistrial in this case. In our view, Judge Thayer proceeded in accordance with the formulation given in United States v. Perez, supra, 22 U.S. at 580, namely, in evaluating the manifest need for the mistrial, he proceeded with "the greatest caution, under urgent circumstances, and for very plain and obvious causes."
JUDGMENT OF THE COURT OF SPECIAL APPEALS REVERSED; CASE REMANDED TO THAT COURT WITH DIRECTIONS TO REMAND THE CASE TO THE CIRCUIT COURT FOR GARRETT COUNTY FOR REINSTATEMENT OF THE INDICTMENT AND FOR TRIAL CONSISTENT WITH THE VIEWS EXPRESSED IN THIS OPINION. COSTS IN THIS COURT AND THE COURT OF SPECIAL APPEALS TO BE PAID BY APPELLEE.
NOTES
[1] The Fifth Amendment provides, in pertinent part, that no person shall "be subject for the same offense to be twice put in jeopardy of life or limb."
[2] For cases relating the history of the manifest necessity standard, see Cornish, supra, 272 Md. at 316-20, 322 A.2d 880. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543678/ | 11 F.2d 766 (1926)
CARSON
v.
AMERICAN SMELTING & REFINING CO.
No. 4304.
Circuit Court of Appeals, Ninth Circuit.
March 1, 1926.
*767 John H. Miller, of San Francisco, Cal. (A. W. Boyken and Chas. S. Wheeler, Jr., both of San Francisco, Cal., of counsel), for appellant.
John C. Higgins, of Seattle, Wash., and John A. Shackleford, of Tacoma, Wash. (George Donworth, of Seattle, Wash., Frederick P. Fish, of Boston, Mass., William K. White, of San Francisco, Cal., and Albert M. Austin, of New York City, of counsel), for appellee.
Before GILBERT, HUNT, and RUDKIN, Circuit Judges.
GILBERT, Circuit Judge.
The appellee presents a petition with supporting affidavits for leave to apply to the court below for permission to file a petition for an order reopening the case for rehearing and for amendment to the answer by setting forth prior use of the appellant's invention in three large reverberatory furnaces in the plant of the Lake Superior Smelting Company at Dollar Bay, Mich., during the years 1903 to 1906, inclusive. Passing by the question whether there is adequate showing of diligence to discover this alleged newly discovered evidence, we think the petition to this court should be denied on other grounds presently to be considered.
The affidavits on behalf of the respective parties as to the use of the appellant's invention by the Lake Superior Smelting Company at Dollar Bay, Mich., are contradictory. For the appellee, there is the affidavit of Conant, the superintendent of the smelting furnaces, that for a period of approximately two years, between 1903 and 1906, the smelting company operated at its plant three smelting furnaces known as 9, 10, and 11, each having holes in the roof "near the vertical side walls," and that the entire smelting charge was fed to the furnaces through side passages, so as to form an embankment along the side walls and render fettling unnecessary. Kitts, the master mechanic, made affidavit that the furnace was equipped with ten round hoppers, positioned to feed charges through the roof, and that for a period of approximately two years all the ore smelted was charged along the side walls, and no center charging was used, and no fettling was used.
The affidavit of Teefey, an operative at the furnaces, was to the effect that furnace No. 9, when originally built, was equipped with square hoppers, charging off center, and that later the furnace was changed from center charging to side charging by 10 charge holes located close to the side walls, and that furnaces Nos. 10 and 11 were constructed in a similar manner; that about June, 1905, both those furnaces were changed, so as to be operated partly by center charging and partly by side charging, and were so used until about the year 1911.
The affidavit of Valliere, the head brick mason in charge of the construction of furnaces 9, 10, and 11, was in substance that furnace No. 9 was first constructed with hoppers for center feeding, but that new hoppers for side feeding were subsequently installed; that furnace No. 10 was constructed with openings for side charging, as well as openings nearer the center, but the four charge holes nearest the center were subsequently closed; that in the operation of furnace No. 8 prior to 1903 fettling material was fed through the holes in the two sides of the roof along the side walls, and that the material used was sand which came from the shores of Lake Superior; that thereafter no fettling was required.
Liebtrau, a brick layer foreman at the plant, made affidavit that in 1905 furnace No. 9 had ten round iron hoppers, five on each side, for side charging, and that the same was true of furnace No. 10 and furnace No. 11. Of similar import is the affidavit of Moehrke, machinist, as was also the affidavit of Greene, brick mason, and Roy, workman, and Morency, brick mason helper, and Varden, workman.
Seven other operatives at the plant made affidavits all to the effect that the ore was fed to the furnaces through openings near the side walls thereof, and that there was no center feeding, all of which was explained at length, and the majority of them made affidavit briefly and in identical phrase that "no fettling was necessary and no fettling was done." A minority of them made no mention whatever of the subject of fettling.
*768 For the appellant there was the affidavit of Treglown that he was employed continuously at the Dollar Bay plant from 1887 to 1919, with the exception of 11 months beginning May 30, 1904, and ending April, 1905, during which time he was foreman at a smelting plant a few miles distant therefrom; that during his employment at the Dollar Bay plant his duties were to charge the furnaces with mineral, to skim off the slag, to tap the smelted copper into the refining furnaces, and to sand the furnaces when empty, in order to protect the inside walls; that the method was to dump the mineral into hoppers located above the roof and over the rear half of the furnace; that the mineral was let down through a number of charging holes in the furnace roof, and distributed on the furnace floor; that at intervals of three or four days the furnaces were emptied of melted copper, and sand was thrown in against the side walls and bridge, in order to protect the fire brick lining against being cut by the melted copper and slag; that the sand was thrown through the side doors by shovels and against the opposite wall; that some sand was put in through the skim hole at the front of the furnace and was by paddles placed against the side walls; that during the early operation of one of those furnaces some small holes were made in the roof along the bridge and sand was poured through these holes in order to protect the bridge, but that those holes were used only a few months as better results could be obtained with the paddles.
Said the affiant: "If we had left these furnaces go for more than a few days without resanding, the melted copper and slag would have cut into the brick walls, and the walls would have toppled over." He made a sketch of the plan of the roof, showing charging openings distributed over the surface thereof, but none placed so near to the side walls as to deposit a charge against those walls. The two charging holes nearest the front of the furnace, as shown in the sketch, were never used, he said, and were sealed up for the reason that the front of the furnace was so far from the fire box that it was difficult to melt the mineral fed through those holes, and that the hoppers that were inside the center line of the furnace were used every time the furnace was charged for the reason that the heat was greatest near the center and the mineral there melted more quickly, and he deposed that, when the mineral was fed through the charging openings, it formed cone-shaped piles on the floor of the furnace, the top of the cones being some distance from the inner walls of the furnace, and that they never blocked up the side walls with mineral, but always left a channel at each side to let the slag flow along toward the front, and that the mineral was never fed into any of these furnaces directly against the side walls, as testified by Conant, the superintendent, but that it always formed cone-shaped piles from the different charging holes; that if such embankments of unmelted minerals had been maintained against the side walls they would have blocked the tap holes at the sides of the furnace at the bottom, so that melted copper could not have been drawn through them into the refining furnaces; that sand was always thrown against the wall by shovels from the side doors on the opposite sides of the furnace.
The affidavit of Des Roches was that he was surface foreman in charge of handling materials used in the smelting furnaces at the Dollar Bay plant, and that all the unloading of the mineral into the hoppers above the furnaces came under his supervision and direction, as also the hauling of the sand from the sand shed to the sides of the furnaces, where it was used to protect the inside of the furnace from cutting by the melted copper and slag. The substance of his affidavit is similar to that of Treglown. He said: "Sand was always used in the furnaces of this plant from the beginning of the operation during my time there (1898 to 1919). None of these furnaces was ever run while in normal operation for more than a few days, or possibly a week at a time, without the men putting new sand into them to protect the inside walls from the melted copper and slag. Before charging these furnaces with mineral, the sand was thrown by shovels from each side door to the inside of the opposite side wall, and also against the bridge at the rear. Some of it was put in through the skim hole at the front by means of long paddles. I remember that, just as soon as furnaces numbers 9, 10, and 11 were started, we used considerably more sand at the plant than formerly. As I was in charge of distributing this sand around to the different furnaces, I was, of course, in a position to know this."
The affidavit of Frank Fernette was that he was a workman at the plant from 1896 to April, 1905; that he loaded the hoppers of the furnaces 8, 9, and 10, and was familiar with the operation of furnace 11. His affidavit corroborated the others that, when the furnaces were in regular operation, fresh sand was thrown through the side doors against the opposite side walls at least once a week, if not oftener; that these furnaces were never charged in such a way that the *769 mineral formed an embankment against the side walls; that the mineral was entirely melted before tapping, and no embankments of mineral remained at the sides; that sand was always used between the mineral or melted copper and the inside walls of the furnaces to protect them.
The affidavit of William Fernette states that he entered into the employment of the Lake Superior Smelting Company at Dollar Bay in 1901 and worked there continuously until the spring of 1906; that he helped put mineral into the large furnaces known as 8, 9, and 10; that 9 and 10 were equipped with round sheet iron hoppers, arranged in several rows running lengthwise of the furnaces; that the two rows nearest the center line of the furnace were always used, from the time those furnaces were first equipped with round hoppers until he left the employment of the company; that the charging openings nearest the sides were at least two feet from the inside surface of the side walls; that many times he observed the sloping piles of mineral charged through those openings and that they did not pile up against the inner side walls; that the tops of those sloping piles were leveled off by means of a rabble inserted through the side door; that after the furnaces were charged with sufficient mineral the side doors and the charging openings were closed and the furnace was fired; that after the mineral was entirely melted the copper was drawn off through the tap holes at the sides of the furnace into the small refining furnaces; that the tap holes were level with the bottom of the inside of the furnace; that side walls and bottom of the bridge in these furnaces were always protected against cutting by the melted copper and slag by lake sand, which was pitched in from one side to the other through the side doors by shovels; that in some of the places, where it was hard to reach, the sand was put on paddles and placed against the walls; that when the large furnaces were used as smelting furnaces none of them was ever operated for more than three or four days at a time, or at the most a week, without being resanded along the side walls and the bottom of the bridge, "and this required considerable sand." "This practice of sanding the furnaces was never departed from at any time on any of these furnaces while I was employed at the Dollar Bay plant."
Kahler deposed that he was in the employment of the Smelting Company at Dollar Bay from 1899 to 1919; that his duties were to help in the running of the furnaces, comprising the operation of sanding the same; that in preparing furnaces 10 and 11 to receive a new batch of minerals a coating of sand was always provided along the side walls; that it was thrown in through the side doors and the skimming hole at the front end with shovels and a long paddle. "This sand was always provided to protect the walls from being eaten and pitted by the action of the hot slag and copper. This method was used in running all the furnaces in this plant during the time I was there, and these furnaces were always sanded before each batch to protect the walls."
Nye made affidavit that he entered the employment of the Smelting Company at Dollar Bay in 1891; that furnaces 9, 10, and 11 were used until about the middle of 1905 only for smelting copper ore or mineral; that after about the middle of 1905 they were used both for smelting and refining; that, while they were being used for smelting only, he often worked on furnace No. 10, and watched its operation daily; that the regular practice was, after the molten copper was drawn off from the furnace, to line the interior of it at the juncture of the floor and side walls with sand; that he was usually given the job of wheeling sand in the wheelbarrow from a nearby pile to the furnace, that this sanding of the interior of the furnace was a regular practice on No. 10, and that he saw it regularly done on furnaces 9 and 11. Referring to the claim that furnaces 9, 10, and 11 were operated continuously without sand or fettling material, he deposed: "I know of my own knowledge, due to my daily working around these furnaces and observing their operations, that such is not the fact. The practice of sanding the interior of these furnaces to protect them from the action of hot slag and copper was always carried on at the Dollar Bay plant of the Lake Superior Smelting Company, while I was there."
Grahel made affidavit that he was employed continuously as a smelter and refiner of copper ore at the Dollar Bay plant from 1890 until 1919, and worked as a runner of the furnaces; that in all of the large furnaces they always threw the sand through each side door on the floor, against the inside of the opposite wall, and if the distance from the door was too far the sand was placed by means of a sheet metal paddle held on the end of a long handle made of iron pipe; that on furnace No. 10 charging holes had been put in the roof near the center, and a few more holes had been added outside of the center holes, so that the charge was distributed more evenly on the bottom of the furnaces than when it was dumped in a heap through the holes in the center. "The result was that the *770 charge in the center of the furnace melted first, and we found, when we went to tap the furnace, that some of the charge at the sides had not completely melted, so that we had great trouble in getting the melted copper to run out through the tap holes at the side of the furnace. This unmelted charge plugged up the tapping hole, so that we had to use steel bars to try to open it up. * * * We always used sand to protect the inside walls of all the furnaces at the Dollar Bay plant all the time I was there. We never smelted or refined copper in any of these furnaces at any time without using sand between the mineral and the inside wall, to keep the hot copper and slag from cutting and eating into the walls of the furnace."
Mailhot made affidavit that during the year 1903 he entered the employment of the smelting company at Dollar Bay and worked for a few years; that it was always the custom to provide a coating of sand along the floor of the furnace, where it joins with the side walls, to protect the side of the furnace from being eaten by hot copper and slag; that he never heard of any of these smelting furnaces being operated without providing such a coating of sand for protection. "It was our custom, while I was working on the large furnaces, to provide a fresh coating each time a new charge was put in the furnace, save that occasionally, if the sand was in good condition, we would let it go for another batch without sanding."
Boatman made affidavit that he was in the employment of the Smelting Company at Dollar Bay from 1890 to 1919; that he worked on furnaces 9, 10, and 11 during the period when they were used for smelting only, and helped in the various operations. "It was our custom at all times on the large furnaces, as well as the small furnaces, to provide a coating of sand along the side walls at their juncture with the floor, to protect the walls from being pitted and scored by the action of the hot copper and slag."
Harvey made affidavit that he worked for the smelting company at Dollar Bay from 1899 to 1910; that he ran No. 9 furnace for about a year, and thereafter ran No. 10; that all of the furnaces used sand for the protection of the side walls; that where smelting was done sand was thrown in every three or four days. To the same effect, in substance, are the affidavits of Jandron and Ryan.
In reply to the affidavits of the appellant, the appellee produced affidavits of several affiants, denying the use of sand for fettling in the furnaces 9, 10, and 11, and affidavits of several of those who had signed affidavits for the appellant, repudiating to some extent the statements which they had formerly made. In the main, the substance of their new affidavits relates to the position of the hoppers and the method of feeding the ore. Ryan, in his new affidavit, deposed that "no fettling or sanding was required, and none was done," and Harvey stated that sand was not used for fettling in furnaces 10 and 11. Treglown, in his new affidavit, stated that the charging material formed sloping embankments resting upon the floors or hearths and along the vertical side walls of the furnaces, but he made no retraction of his former affidavit as to the use of sand for fettling. The same is true of Nye's and Kahler's second affidavits.
The workmen who made affidavits for the appellant appear to have been disinterested. They had been in close touch with the operation of furnaces 9, 10 and 11. Their original affidavits are all to the effect that fettling was continuously used in the furnaces during the very period when it is claimed that the appellant's invention was in use there. Corroborating them to some extent is the record proof of the large quantities of sand purchased by the Lake Superior Smelting Company for use at Dollar Bay during that period. The affidavits so submitted, together with the accompanying circumstances, create the strong impression that during the brief period so referred to there were in use at the plant of the Lake Superior Smelting Company, at Dollar Bay, three furnaces in the construction of which a change had been made from the prevailing type, in that the ore, instead of being fed through center openings of the roof, was introduced through the openings near the side walls, but that at the same time fettling continued to be used as theretofore, and that there was no thought of dispensing with fettling, and no discovery of the fact that its use could be obviated, and that the evidence now produced that no fettling was done is inspired by the after-discovered fact that "no fettling was necessary."
But, if the application here rested alone upon the affidavits presented by the appellee, the showing would be insufficient to establish prior use of the invention so as to defeat the patent. In Gayler v. Wilder, 10 How. 477, 13 L. Ed. 504, it was held that the prior use must be so far understood and practiced or persisted in as to become an established fact, accessible to the public and contributing definitely to the sum of knowledge. In Ajax Metal Co. v. Brady Brass Co. (C. C.) 155 F. 409, 416, it was said: "It is incumbent on the defendants, therefore, to show *771 that the prior use which is set up was so far appreciated at the time, and adopted or followed, as to create a well-understood, if not an established, practice, capable at any time of being resorted to, and not something incidental, indefinite, and fugitive, which is now hunted up and brought forward simply for the purpose of defeating the patent." In Anthracite Separator Co. v. Pollock (C. C.) 175 F. 108, 111, it was held that prior use, in order to negative novelty, must be something more than an accidental or casual one; that the use must have been accessible to the public and an established fact in the art. It is well settled that the oral testimony of many witnesses, if unsupported by any evidence consisting of documents or things, must be very reasonable or very strong to establish the defense of prior use. The Barbed Wire Patent, 12 S. Ct. 450, 143 U. S. 275, 36 L. Ed. 161; Deering v. Winona Harvester Works, 15 S. Ct. 118, 155 U. S. 286, 39 L. Ed. 153.
In the Barbed Wire Patent Case Mr. Justice Brown said: "The frequency with which testimony is tortured, or fabricated outright, to build up the defense of a prior use of the thing patented, goes far to justify the popular impression that the inventor may be treated as the lawful prey of the infringer." In Eibel Process Co. v. Minnesota & Ontario Paper Co., 43 S. Ct. 322, 327, 261 U. S. 45, 60 (67 L. Ed. 523), Mr. Chief Justice Taft said: "The temptation to remember in such cases, and the ease with which honest witnesses can convince themselves after many years of having had a conception at the basis of a valuable patent, are well known in this branch of law, and have properly led to a rule that evidence to prove prior discovery must be clear and satisfactory." In Kalamazoo Loose Leaf Binder Co. v. Wilson Jones L. L. Co. (D. C.) 286 F. 715, 717, Judge Hand said: "I think the proof scarcely comes up to the severe standard imposed in such cases. There is no documentary corroboration of it, and the testimony of the witnesses, though unimpeached, is not supported by any circumstances which put it beyond the inevitable infirmities of their recollection. The most recent declaration of the Supreme Court, in Symington v. Nat. Castings Co., 39 S. Ct. 542, 250 U. S. 383, 63 L. Ed. 1045, shows no disposition to relax the well-established canon."
The question whether or not the appellee should have leave to apply to the court below for permission to file a bill of review must be decided upon the showing made upon the affidavits (Suhor v. Gooch, 248 F. 870, 160 C. C. A. 628), and permission in such a case will be denied, unless the evidence is so controlling that it would probably induce a different conclusion from that on which the decree was based. Jourolmon v. Ewing, 85 F. 103, 29 C. C. A. 41; Society of Shakers v. Watson, 77 F. 512, 23 C. C. A. 263; Novelty Tufting Mach. Co. v. Buser, 158 F. 83, 85 C. C. A. 413, 14 Ann. Cas. 192; Kissinger-Ison Co. v. Bradford Belting Co., 123 F. 91, 59 C. C. A. 221. In Eclipse Mach. Co. v. Harley-Davidson Motor Co. (C. C. A.) 286 F. 68, it was held that the application must show that the evidence is of a character sufficiently decisive on the merits to move the court in its decretion. Judge Woolley said: "Applications of this kind, involving not infrequently belated attempts to escape the consequences of adverse decisions, are not favored by courts and are, accordingly, subjected to the closest scrutiny." In Providence Rubber Co. v. Goodyear, 9 Wall. 805, 19 L. Ed. 828, it was held that a bill of review will not be granted where the court is satisfied that upon the case offered to be made out the decree ought to be the same as has been already given. Said the court: All "the affidavits have failed to satisfy us, that if a bill of review were filed the result would affect the decree which has been rendered." In Bresnahan v. Tripp Giant Leveller Co., 99 F. 280, 284, 39 C. C. A. 508, 511, it was said: "The decisions (and there are many) all go at least to the extent of saying that the new evidence, to warrant it, must be so cogent and persuasive as to impress the court with the conviction that, if it had been presented and considered on the original hearing, it would have clearly produced a contrary conclusion from the one there reached."
The evidence in support of the present application is oral. It is not supported by any physical object or by documentary proof. The documentary evidence of blueprints or plans for the construction of the furnaces which has been adduced is not at all incompatible with the appellant's affidavits concerning the actual method of operating and fettling the furnaces by the workmen who had charge of them. There is nothing in the proof offered by the appellee to show that any person other than the appellant ever conceived the idea of dispensing with fettling by banking the ores against the furnace sides. If any other person conceived that idea his conception is not shown to have been made known to anyone, or in any way disclosed to the public as an improvement or otherwise. If the furnaces were in fact operated in the manner asserted by the appellee, it must have been done without any conception of the inventive *772 idea which underlies the patent. It is not even hinted that such operation was recognized as a discovery, or as a new operation or an improved operation, or as anything different from that which had gone before. It is not suggested that it was ever mentioned in the eight or nine metallurgical books on subjects such as "Copper Mines of Lake Superior," "Recent Copper Smelting at Lake Superior," etc., published at intervals between 1904 and 1914.
The application is denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543740/ | 11 F.2d 715 (1926)
WULFSOHN et al.
v.
RUSSO-ASIATIC BANK.
No. 4343.
Circuit Court of Appeals, Ninth Circuit.
March 22, 1926.
Rehearing Denied April 30, 1926.
*716 Frank E. Hinckley, of San Francisco, Cal., Max Radin, of Berkeley, Cal., and Richard T. Evans, of Tientsin, China (Otto C. Sommerich and Edwin M. Borchard, both of New York, of counsel), for plaintiffs in error.
Chickering & Gregory, of San Francisco, Cal., for defendant in error.
Before HUNT, RUDKIN, and McCAMANT, Circuit Judges.
RUDKIN, Circuit Judge.
This is a writ of error to review a judgment of the United States Court for China. The case was heard on an amended petition, answer, and reply. The amended petition alleges, in substance, that the plaintiff is a banking corporation organized under the laws of Russia, with offices in Shanghai, Harbin, and other places in China and elsewhere; that the defendants are copartners having a place of business in New York City, and maintaining an agent in Harbin and elsewhere in China, within the jurisdiction of the United States Court for China; that during the years 1919 and 1920 the plaintiff bought from the defendants, and the defendants sold to the plaintiff, the sum of gold $160,000, for which the plaintiff agreed to deliver to defendants roubles, as more particularly set forth in those certain exchange contracts attached to and made a part of the amended petition; that the plaintiff has performed its part of the contract; that the defendants have failed, neglected, and refused to perform their part; and that there is now due and owing from the defendants to the plaintiff the sum of gold $160,000.
The answer denies on information and belief that the plaintiff is a banking corporation organized under the laws of Russia as alleged, and denies on like information and belief that the persons bringing the action are the Russo-Asiatic Bank, to which the defendants gave the instruments which form the basis of the amended petition herein, or their successors in law; admits that the defendants are copartners, with a place of business and agency as alleged; admits the execution and delivery of the instruments attached to the amended petition; and denies each and every other allegation thereof. By way of special defense the answer avers that the transaction set forth in the amended petition was part of a series of transactions of exchange, and that gold dollars of the full value of all roubles received have been delivered to the plaintiff in New York. The reply denied the affirmative matter in the answer.
Thereafter, and before the trial, the defendants below interposed a motion to dismiss for the following reasons: (1) That books and papers belonging to the defendants and material to their defense have been impounded by the de facto Russian government, and the defendants have been denied access thereto; (2) that a certain material and necessary witness for the defendants is not permitted by the Russian government to leave Russia, or to give evidence at the trial; (3) that the plaintiff, according to its amended petition, is a Russian corporation, and as such is an instrumentality of the Russian government; (4) that the Russian government has not been recognized by the United States of America, and may not sue in an American court; (5) that the right of an alien to sue in our courts is a matter of comity, not of right, and in this case the privilege should be denied; (6) that the contracts set forth in the amended petition are illegal according to Russian law.
The motion to dismiss was denied, and the case went to trial. After the close of the trial the court delivered its opinion in writing and gave judgment for the plaintiff below. Numerous errors have been assigned, and many questions of public and private law have been discussed in the briefs of counsel for plaintiffs in error; but many of the errors thus assigned are not open to review on the record brought here, because no request was made to the court at the close of the trial to find the facts specially, or to find generally, for the plaintiffs in error. In the absence of any such request, and a ruling thereon and an exception thereto, the general finding of the court stands as the verdict of a jury, and an exception thereto presents no question for review.
This rule has been so often affirmed by this court that it is deemed scarcely necessary to refer to the authorities. However, see China Press v. Webb (C. C. A.) 7 F.(2d) 581, where the rule is held applicable to writs of error to the United States Court for China, and the cases there cited. The only questions subject to review, therefore, are rulings made during the progress of the trial, to which exceptions were reserved, and errors apparent from an inspection of the pleadings, process, and judgment.
Among other contentions made is that the statute of limitations is a bar to the action. It is perhaps a sufficient answer to *717 this to say that the statute was not pleaded as a defense to the cause of action set forth in the amended petition. The original petition was filed December 19, 1922. This was general in its terms and made no reference to any written contracts. January 16, 1923, a demurrer to the petition was interposed on the ground that the action was not commenced within the time required by regulation 83 for the United States Consular Courts in China. April 10, 1923, an amended petition was filed, based on the written contracts, and copies of those contracts were attached as exhibits. April 21, 1923, the court filed an opinion overruling the demurrer to the petition. It would thus appear that the record is somewhat inconsistent on its face.
The amended petition, complete in itself, superseded the original petition for all purposes, and no ruling of the court on the original petition, whether made before or after the amendment can be assigned as error. "An amended complaint, which is complete in itself, and which does not refer to or adopt the original complaint as a part of it, entirely supersedes its predecessor, and becomes the sole statement of the cause of action. The original complaint becomes functus officio from the date of the filing of its successor." United States v. Gentry, 119 F. 70, 75, 55 C. C. A. 658, 663.
From the mere filing of the amended petition it might be inferred that counsel for the petitioner were of opinion that the plea of the statute of limitations to the original petition was well taken, and from a failure to plead the statute of limitations to the amended petition it might be inferred that the defendants abandoned the claim that the action was barred by the statute of limitations, because of the written contracts. The opinion of the court on the demurrer refers to the exchange orders or written contracts which were made a part of the amended petition only, and it might be inferred from this that the court treated the demurrer on file as if interposed to the amended petition.
But these are matters of conjecture only, and the fact remains that the statute of limitations was not pleaded in any form to the cause of action set forth in the amended petition. In the absence of such a plea there is nothing before us for review. "The statute of limitations ordinarily does not operate by its own force as a bar, but as a defense to be pleaded by the party invoking the benefit of its protection, and therefore, as a general rule, in order that defendant may avail himself of the bar of the statute as a defense at the trial, whether in a suit in equity, or in an action at law or under the codes, he must by some appropriate pleading, such as by demurrer, where that form of pleading is available, or by plea or answer, affirmatively plead the statute. If the statute is not pleaded in a proper time and manner, it is deemed to be waived, and cannot be set up as a defense at the trial." 37 C. J. 1213.
But, in any event, it would seem that there is no substantial merit in the defense. If there was any cause of action in favor of the plaintiff below, it was based on written contracts which are not subject to the two-year statute of limitation. The court below found that such contracts existed, and with that finding we are in full accord.
Counsel for the plaintiffs in error challenge the jurisdiction of the court below, but are again confronted with the objection that no such question was raised in that court. It was not raised by demurrer or answer, nor was it raised by the motion to dismiss, the grounds of which have already been stated. The first two grounds of that motion might be urged in support of an application for a continuance, but they afford no possible basis for a dismissal of the action; the last ground relates entirely to the merits, and the three remaining grounds challenge the capacity of the plaintiff to sue, rather than the jurisdiction of the court to entertain the suit. If the question is before us at all, therefore, it must be because it appears on the face of the record.
The plaintiff was a Russian corporation; the defendants were citizens of the United States. The contracts involved in the suit were made in China, were breached in China, and were to be performed in China, in part at least. The case would therefore clearly appear to be within the jurisdiction of the United States Court for China, unless there is merit in the claim that a Russian corporation cannot maintain a suit in that court, because of the absence of any treaty between this country and Russia. But the jurisdiction of that court is conferred by act of Congress, and is not dependent upon treaties between this and other countries, save the treaty with China alone.
No doubt, the jurisdiction over citizens and subjects of Russia might be taken away by treaty with that country; but, in the absence of any such treaty provision, every alien has access to that court where the defendants are American citizens. "The test of jurisdiction over the person in all these territorial courts is the nationality of defendant. Any one may be a plaintiff, but there must be a defendant subject to American authority *718 in order to confer jurisdiction." 25 C. J. 324.
The plaintiffs in error further contend that the Russo-Asiatic Bank was nationalized by certain decrees of the Soviet government of Russia, that from and after the date of such decrees the corporation was dissolved, and that it has no legal capacity to sue. If the decrees in question had followed rather than preceded the transactions which gave rise to the present controversy between the plaintiffs in error and the defendant in error, an interesting question would be presented. But, whether the bank was dissolved or not, the fact remains that it continued to function and transact business, in defiance of the decrees of the Soviet government, and the plaintiffs in error dealt with it and received moneys from it as an existing entity. Under such circumstances, we think that they are clearly estopped to question either the corporate existence of the bank, or its right to maintain an action to recover moneys due it. As said by the Court of Appeals of New York in Joint-Stock Co. v. National City Bank, 148 N. E. 552, 240 N. Y. 368:
"As to the first three decrees, alleged to have been passed or enacted in 1917, they are insufficient for two reasons: First, they have nothing whatever to do with the existence of the plaintiff as a corporation; second, they were in force and effect in June of 1918, when the defendant took the plaintiff's property recognizing it as a corporation and agreeing to pay it back on demand. The defendant is therefore estopped from denying the plaintiff's corporate existence at the time of the deposit."
"In the absence of fraud and subject to other qualifications which will be referred to hereinafter, it may be laid down as the general rule that a person who has contracted or otherwise dealt with an association in such a way as to recognize and in effect admit its legal existence as a corporate body is thereby estopped to deny its corporate existence in any action arising out of or involving such contract or dealing, unless its existence is attacked for causes which have arisen since the making of the contract or other dealing relied on as an estoppel." 14 C. J. 227. See, also, Wilder Mfg. Co. v. Corn Products Co., 35 S. Ct. 398, 236 U. S. 165, 59 L. Ed. 520, Ann. Cas. 1916A, 118.
Again, it is contended that the judgment contains reversible error within itself. The judgment follows the opinion of the court, as seems to be the practice in that jurisdiction, and is somewhat informal. Nevertheless it awards judgment in favor of the plaintiff and against the defendants for the sum of $160,000, "United States currency, with interest on the various items thereof from the dates of delivery fixed by the respective contracts, and costs." A judgment should be definite and certain, and ordinarily interest should be computed up to the date of the judgment and embodied therein. But the rate of interest is a matter of law, and the dates of the different deliveries appear on the several contracts attached to the amended petition. The amount of the judgment is therefore a mere matter of computation, and, under the rule that that is certain which may be made certain, the judgment is sufficient.
Error is assigned in the denial of a motion for a new trial. Such motions are addressed to the sound discretion of the court, and orders denying them are not subject to review on writ of error, in the absence of a plain abuse of discretion. Here the motion was based on the ground of newly discovered evidence, and was properly denied for two reasons: First, the newly discovered evidence would not change the result; and, second, in large part, the evidence was not newly discovered at all.
This disposes of the principal assignments of error. Many other questions are discussed in the voluminous briefs on file, but they call for no special consideration. We have examined all of them, and, finding no error in the record, the judgment is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/366280/ | 598 F.2d 637
13 ERC 1193, 9 Envtl. L. Rep. 20,609
BASF WYANDOTTE CORP. et al., Petitioners,v.Douglas M. COSTLE, as Administrator, EnvironmentalProtection Agency, Respondent.E. I. du PONT de NEMOURS & CO. et al., Petitioners,v.Douglas M. COSTLE, as Administrator, EnvironmentalProtection Agency, Respondent.MONSANTO COMPANY, Petitioner,v.Douglas M. COSTLE, as Administrator, EnvironmentalProtection Agency, Respondent.DOW CHEMICAL COMPANY, Petitioner,v.Douglas M. COSTLE, as Administrator, EnvironmentalProtection Agency, Respondent.MONSANTO COMPANY, Petitioner,v.Douglas M. COSTLE, as Administrator, EnvironmentalProtection Agency, Respondent.DOW CHEMICAL COMPANY, Petitioner,v.Douglas M. COSTLE, as Administrator, EnvironmentalProtection Agency, Respondent.E. I. du PONT de NEMOURS & CO. et al., Petitioners,v.Douglas M. COSTLE, as Administrator, EnvironmentalProtection Agency, Respondent.ELI LILLY AND COMPANY, Petitioner,v.Douglas M. COSTLE, as Administrator, EnvironmentalProtection Agency, Respondent.National Agricultural Chemicals Association, Intervenor.
Nos. 77-1042, 77-1059, 77-1085, 77-1153, 78-1417, 78-1428,78-1454 and 78-1462.
United States Court of Appeals,First Circuit.
Argued Jan. 3, 1979.Decided May 7, 1979.
Douglas E. Kliever, Washington, D. C., with whom Robert C. Barnard, Charles F. Lettow, John S. Magney, and Cleary, Gottlieb, Steen & Hamilton, Washington, D. C., were on brief, for petitioners in Nos. 77-1042, 77-1059, 77-1085, 78-1417, 78-1454, and 78-1462.
J. D. Fleming, Jr., Atlanta, Ga., with whom D. Robert Cumming, Jr., John H. Fleming, and Sutherland, Asbill & Brennan, Atlanta, Ga., were on brief, for petitioner in Nos. 77-1153 and 78-1428.
Robert L. Ackerly, Washington, D. C., with whom Richard A. Flye, Sellers, Conner & Cuneo, Washington, D. C., and Paul M. Siskind, Boston, Mass., were on brief, for intervenor.
Paul M. Kaplow, Atty., Dept. of Justice, and Colburn T. Cherney, Atty., Environmental Protection Agency, with whom James A. Rogers, Associate Gen. Counsel, Steven Schatzow, Deputy Associate Gen. Counsel, Environmental Protection Agency, James W. Moorman, Asst. Atty. Gen., and Angus MacBeth, Washington, D. C., were on brief, for respondent.
Before COFFIN, Chief Judge, BOWNES, Circuit Judge, MAZZONE,* District Judge.
COFFIN, Chief Judge.
1
These consolidated petitions have been brought by eleven manufacturers of pesticides1 against the respondent, the Administrator of the Environmental Protection Agency (EPA or Agency), seeking review of regulations governing the discharge of pollutants by the pesticide industry. 40 C.F.R. Part 455, 43 Fed.Reg. 17776 and 43 Fed.Reg. 44845 (1978). An industry organization, the National Agricultural Chemical Association (NACA), has intervened. The Federal Water Pollution Control Act states as a "national goal that the discharge of pollutants into the navigable waters be eliminated by 1985." 33 U.S.C. § 1251(a)(1). These regulations are promulgated in response to Congress' direction that the Administrator provide guidelines for the effluent reduction possible through implementation of the "best practicable control technology currently available". 33 U.S.C. §§ 1311(b)(1)(A) and 1314(b)(1).2
2
In 1974 the Agency hired an outside contractor, Roy F. Weston, Inc. (Weston), to analyze the industry. Weston submitted its final report in December of 1975. In early 1976 EPA hired a second contractor, Environmental Science and Engineering, Inc. (ESE), to evaluate Weston's work. ESE determined that Weston's work needed improvement and undertook its own study of the industry. In late 1976 EPA published interim final regulations that were immediately effective, but on which EPA invited public comment. 41 Fed.Reg. 48087 (1976). An interim development document and an economic analysis explaining the derivation of the interim regulations were also released.
3
In the months following publication of the interim regulations EPA received comments on many issues raised by the regulations. EPA also collected additional data and conducted further research. In early 1978 the final regulations were published, 43 Fed.Reg. 17776 (1978), as were a final development document and economic analysis. The final regulations differed from the interim regulations in a number of significant ways. The one principally relevant in this case is that EPA finally subdivided the industry into three subcategories: (1) Organic Pesticide Chemicals Manufacturing; (2) Metallo-Organic Pesticide Chemicals Manufacturing; and (3) Pesticide Chemicals Formulating and Packaging. In the interim regulations the organic pesticide subcategory had been further divided into three subcategories. For the second and third final subcategories the regulations permit "no discharge of process waste water pollutants into navigable waters." 40 C.F.R. §§ 455.32 and 455.42. For the first subcategory, 40 C.F.R. § 455.22 limits the pounds or kilograms of chemical oxygen demand (COD), biological oxygen demand (BOD), total suspended solids, and pesticide chemicals that a plant may discharge per thousand pounds or kilograms of pesticide produced during any one day or any 30 consecutive days. The levels set are lower than the levels set by the interims for some producers and higher for others. Also the pH level (the relative acidity or alkalinity) of the effluent must be within a set range.
4
After the final regulations issued, one of the petitioners filed a motion for reconsideration alleging, among other things, that analytical techniques were not available to detect many pesticides at the levels stated in the regulations. EPA reexamined the record and discovered that some measurement methods that EPA thought were available might not be reliable. Accordingly, EPA amended the regulations so that the pesticide content of process waste water would be limited for the producers of only 49 out of several hundred pesticides. 43 Fed.Reg. 44845, 44856 (1978).
5
The first petition for review challenged the interim final regulations. When the final regulations were published we granted permission to amend so as to include review of the finals. BASF Wyandotte Corp. v. Costle, 582 F.2d 108 (1st Cir. 1978). Subsequently the petitions for review filed in other circuits were transferred to this circuit. The consolidated petitions assert several procedural and substantive errors in the regulations and their promulgation.
I. Organic Pesticide Manufacturing
A. Administrative Procedure Act Compliance
6
Petitioners' first complaint is that EPA failed to comply with the requirements of the Administrative Procedure Act in that the final regulations were so different from the interim final regulations that the interims were not notice of "either the terms or substance of the proposed rule or a description of the subjects and issues involved." 5 U.S.C. § 553(b)(3). This requirement is a critical one because it supports the assumption we make with regard to EPA's substantive decisions that those decisions are in fact the product of informed, expert reasoning tested by exposure to diverse public comment. Though our review of an agency's final decision is relatively narrow, we must be strict in reviewing an agency's compliance with procedural rules. See Weyerhaeuser Co. v. Costle, 590 F.2d 1011, 1027-1028 (D.C. Cir. 1978).
7
In this case EPA issued interim final regulations and sought comments on them. Industry representatives, government agencies, and others submitted voluminous comments on many aspects of the interim regulations. It is clear that EPA gave careful consideration to these comments. The Agency summarized the public comment, together with the Agency responses in the prologue to the final regulations. 43 Fed.Reg. 17781-85 (1978). The Agency accepted several suggestions made in comments critical of the interim regulations. For instance, EPA deleted some parameters by which the interim regulations controlled discharges,3 abandoned use of COD/BOD ratios to supplement raw waste load data, and tried certain statistical tests proposed by commenters. EPA further demonstrated its openness to comments by eliminating, as we have noted, pesticide discharge limits for all but 49 chemicals in response to information received after the final regulations were printed.
8
The procedural rules were meant to ensure meaningful public participation in agency proceedings, not to be a straitjacket for agencies. An agency's promulgation of proposed rules is not a guarantee that those rules will be changed only in the ways the targets of the rules suggest. "The requirement of submission of a proposed rule for comment does not automatically generate a new opportunity for comment merely because the rule promulgated by the agency differs from the rule it proposed, partly at least in response to submissions." International Harvester Co. v. Ruckelshaus, 155 U.S.App.D.C. 411, 428, 478 F.2d 615, 632 (1973); Weyerhaeuser Co. v. Costle, supra, at 1031; American Frozen Food Institute v. Train, 176 U.S.App.D.C. 105, 132, 539 F.2d 107, 134 (1976). Even substantial changes in the original plan may be made so long as they are "in character with the original scheme" and "a logical outgrowth" of the notice and comment already given. South Terminal Corp. v. EPA, 504 F.2d 646, 658, 659 (1st Cir. 1974).
9
The essential inquiry is whether the commenters have had a fair opportunity to present their views on the contents of the final plan.4 We must be satisfied, in other words, that given a new opportunity to comment, commenters would not have their first occasion to offer new and different criticisms which the Agency might find convincing. Weyerhaeuser, at 1031. Thus, where the final rules "are the result of a complex mix of controversial and uncommented upon data and calculations", remand may be in order. Id. Similarly, where the Agency adds a new pollution control parameter without giving notice of intention to do so or receiving comments, there must be a remand to allow public comment. American Frozen Food Institute, supra, 176 U.S.App.D.C. at 133, 539 F.2d at 135. The question, however, always requires careful consideration on a case-by-case basis.
10
The first and principal change complained of is the Agency's decision to merge the first three interim subcategories5 into a single Organic Pesticide Chemicals Manufacturing subcategory.6 So far as the record discloses, petitioners were not aware of this change until the final regulations were promulgated and the time for comment had expired. EPA consolidated the former subcategories because it "recognized certain ambiguities were present in its subcategorization based on chemical structure. Many pesticides contain more than one functional group . . . and do not fit the former subcategorization scheme." 43 Fed.Reg. 17777 (1978). Consequently, "and in response to industry comments", EPA undertook further research and found that "the quantities of pollutants in the effluents of those plants with the properly operated model technologies installed were similar regardless of the organic pesticide chemicals manufactured. The Agency . . . therefore concluded that the waste waters of all organic pesticide chemicals can be treated or controlled to the levels documented. . . . Thus, the final regulations do not differentiate among halogenated organic, organo-phosphorus, or organo-nitrogen pesticide chemicals." Id.
11
The industry comments were almost unanimous in condemning the three original subcategories both for being internally inconsistent and insufficiently differentiated from the other categories.7 Comments presented statistical tests of EPA's data, purporting to show that the subcategories were not distinguishable from each other.8 Comments also pointed to the inclusion of very different compounds within particular subcategories. The comments made a strong case against use of the interim subcategories, and EPA decided that the criticism was persuasive. It follows that EPA had to decide on an alternative unless it was to abandon regulation of the pesticide industry. Industry's preference was clear. They wanted EPA to expand the number of subcategories. They are now aggrieved because EPA accepted their criticism of the original subcategories but chose a different solution, collapsing rather than expanding them. Petitioners suggest that EPA's response took them entirely by surprise and that EPA had somehow indicated that the only issue for comments would be whether three subcategories were enough or there should be more.
12
Neither suggestion is grounds for remand. It should be clear to commenters when they criticize a regulatory scheme that if the agency accepts those criticisms, a new scheme will be substituted. The commenters cannot claim they had no notice to propose and discuss alternatives. And in fact they did so, suggesting a number of new approaches based on different ways to subcategorize the industry. In fact, at least one commenter recognized that if the existing scheme was not defensible, one alternative would be to abandon subcategories. This commenter, also a petitioner, Monsanto, wrote:
13
"It is our belief that additional partitioning of chemical groups based on the above environmental impact factors must be accomplished If the Agency intends to pursue the subcategorization approach." App. at 1905. (Emphasis added.)
14
Clearly Monsanto realized that the Agency would have to consider alternatives and was not finally committed to subcategories. Moreover, Monsanto's response indicates that the Agency had not misled petitioners into thinking that they need only state views on the desirability of more subcategories rather than the undesirability of fewer.
15
Another repeated call of the industry commenters was that the subcategories should be more equitably treated because the record did not support the significantly different guideline limits assigned to the different subcategories.9 They should have realized that these criticisms, if accepted, could be resolved, among other ways, by applying the same limits to all organic pesticides. Again, though EPA's solution was not the one for which industry argued, it was suggested by and, in part, a logical outgrowth of industry's comments. They cannot now complain because they misread the regulatory waters, incorrectly anticipated how EPA would react to their criticisms, and, consequently, submitted comments that left some things unsaid.
16
Not only do we think that petitioners had fair notice that consolidation of subcategories was an issue to comment upon, but we cannot think how their comments would have differed fundamentally if they had known what EPA would do. Though they would have had a different proposition against which to argue, their proposed solutions would, presumably, have been the same for the same reasons. They might have responded in greater volume or more vociferously, but they have not shown us that the content of their criticisms would have been different to the point that they would have stood a better chance of convincing the Agency to use more subcategories. In short, they had a fair opportunity to present their views on how the industry ought to be subcategorized. Their real complaint is that EPA rejected those views.
17
For the same reasons, we do not think EPA was obligated to provide further opportunity to comment on "its decision to limit the regulations to those pesticides for which there are reliable analytical methods" or "its determination that all pesticides can be treated to a single level regardless of differences in treatability of particular pesticides". To the extent the latter differs from the decision to consolidate categories, it was clearly signalled in the interim regulations. As the commenters pointed out, the interim subcategories were based on physical structure and each included chemicals of diverse treatability. The industry's comments plainly suggested that treatability ought to be taken into account.10 Similarly, as to the former, the interim regulations applied a limit on the discharge of total pesticides to all manufacturers of pesticides. Any manufacturer that had reason to believe its pesticides could not be detected at the guideline limit had the opportunity to ask the Agency to change its regulations as to any particular pesticide or as to all pesticides. The Agency's receptiveness to such comments is indicated by the very decision attacked, its elimination of limits as to all but 49 organic pesticides when confronted with information showing that others were not reliably detectible. There was no lack of notice as to these subjects.
18
The last point we must address is a different and more difficult one. One of EPA's justifications for consolidating the subcategories and for reducing the discharge limits for many pesticides was the conclusion, based in part on "additional raw waste load and treatment data, and additional pilot plant and laboratory data" that "the waste waters of all organic pesticide chemicals can be treated or controlled to the levels documented in the Agency's data base." 43 Fed.Reg. at 17777. The BASF petitioners argue that since the EPA's conclusions were premised on "new data on the applicability and effectiveness of treatment by activated carbon and by hydrolysis" EPA should have entertained a new round of comments.11
19
Certainly nothing is more important than the bottom line numbers which determine whether individual plants are or are not in compliance with the regulations. The data that an agency has used to set proposed limits obviously should be subject to public comment if possible. Indeed, as another circuit court has noted, factual matters "are especially subject to verification through the notice and comment process and less acceptably removed therefrom." Weyerhaeuser, slip op. at 1030 n. 26.
20
This does not mean, however, that any new numbers gathered after publication of proposed regulations must be submitted for comment. It is perfectly predictable that new data will come in during the comment period, either submitted by the public with comments or collected by the agency in a continuing effort to give the regulations a more accurate foundation. The agency should be encouraged to use such information in its final calculations without thereby risking the requirement of a new comment period. Though in this instance the new information is in the form of numbers, our inquiry is no different than where the new information takes any other form. We must decide whether using new data that reduced the effluent limits for many of the producers deprived the public of a fair opportunity to present views on the final data base. If data used and disclosed for the interim regulations presented the issues for comment, then there is no need to seek new comment even though significant quantitative differences result.
21
We conclude that EPA was within the law. The final regulations set the pesticide discharge limit on the basis of data from nine plants with recommended pesticide removal technology. Seven of these nine plants were mentioned in the interim development document as forming the basis for or supporting the limits set by the interim regulations.12 These seven plants accounted for about 82 per cent of the data points used to determine the final limits. Their products, treatment systems, and raw waste load were all discussed in detail in the interim development document, as was what was known of the content of their waste water discharges. On the strength of what was disclosed in the interim development document, therefore, petitioners could have commented on the applicability of these plants' treatment systems to other plants, and on the importance of different processes, products, and volumes.
22
More importantly, the interim development document disclosed the method by which EPA calculated the limits. This methodology was substantially the same for the interim and final regulations. EPA afforded petitioners the chance to make the most meaningful possible contribution to the regulatory process because the petitioners could use the information to collect data at their own plants, analyze it, and submit it to EPA. Not only would such input have guaranteed that EPA would be acting on the most complete data base possible, but it would have guaranteed that the special problems faced by each petitioner would have been taken account of by EPA and contributed to the resulting limitations.13 Petitioners knew the role that every available piece of data would play in generating the limits. EPA used all the data supplied to it.
23
As to these seven plants, petitioners knew all they needed to know in order to make a meaningful contribution to the regulatory process and a meaningful comment on the regulations proposed. All they did not know was what the actual raw numbers would be. While these numbers were certainly crucial in setting the limits and of obviously great interest to the petitioners, we are not convinced that knowing them would have significantly improved petitioners' opportunity to comment. They would have had a different numerical target for their many complaints about the limits set, but that would not have greatly advanced their ability to make positive contributions to the process by criticizing from their own knowledge the treatment technologies recommended, the success they could anticipate by implementing those technologies, and the analytical and statistical methodology EPA used to turn the raw numbers into effluent limits. In short, in this case, we think it was far more important for EPA to solicit comments on how it intended to collect and use data than on the data itself.14
24
Regulatory targets have no guarantee that proposed effluent limits, which they are capable of meeting, will stay the same. The purpose of soliciting comments is to be able to make informed changes, and those interest groups preferring looser limits are not the only ones whose comments are solicited. Other governmental agencies or public environmental protection groups are free to seek whatever changes they feel desirable, and the EPA is free to adopt those suggestions if it is persuaded.
25
As for the two plants that did not contribute to the generation of the interim limits, the same arguments apply in part. All they added to the process were more numbers to be used in the same way as the other numbers. Their treatment technologies are not markedly different from the others and conform to EPA's fully disclosed model technology.15 Moreover, were these two plants omitted from consideration the final limits would be more stringent since both of these plants discharge more than the allowable amount of pollutants.16
B. EPA's Scientific Methodology
26
The BASF petitioners have tenaciously attacked the methodology and data used by ESE in calculating the final effluent limitations for organic pesticides. If ESE's work is not reliable, then the final limitations cannot stand. Partly because of a belated turnover of some 2000 pages of laboratory documents all of those used by ESE for this rulemaking proceeding we have been faced with three rounds of briefing memoranda, dealing with targets that were both moving and increasingly particularistic. If we are not to lose our bearings in this extensive cross-fire of chemical expertise, it is important for us to gain and hold a perspective both as to facts and law.
27
ESE was retained in 1976, after EPA became dissatisfied with the work done over the prior two years by another contractor. ESE thereafter collected data from pesticide manufacturers and did its own experimentation on samples of waste water, the manufacturers furnishing 95 per cent of the data, and ESE laboratory work accounting for 5 per cent. The methodology and resulting data used by ESE to identify and quantify organic pesticides relate to two techniques, gas chromatography (GC) and thin layer chromatography (TLC). The method attracting most of the controversy in this appeal is gas chromatography. It involves vaporizing a sample of effluent, passing it through a column filled with various materials, which impeded the flow of each compound at a characteristic rate. Results are recorded on a continuous chart which shows a "peak" when each compound exits the column, thus identifying it in terms of the time it appears, and which indicates concentration by the height and area of the peak. The method is neither simplistic nor self-executing. It involves the use of several columns, the testing and calibrating of each with samples containing known quantities of known pesticides, continual checking, and constant alertness for the presence of unforeseen substances which can distort the recording on the strip chart. The method succeeds only in careful and expert hands.
28
The lore of gas chromatography has been recognized for some time, being the subject of a handbook compiled in 1972 by EPA's Analytical Quality Control Laboratory (and the source of ESE's practices in this rulemaking procedure), the "Analysis of Pesticide Residues . . . " in 1974 and "Analytical Procedures for Pesticides Approved by EPA per 40 C.F.R. Part 136", App.1997-2090. These compilations dealt with means of isolating interferences (distorting effects occasioned by the presence of unidentified substances), the preparation of apparatus, calibration, reagents, solvents, standard quality control practices, the preparation of samples, extraction, clean-up, and reporting. Part of the product of ESE's work lay in the development of a new handbook, the Quality Assurance Manual, which was in revision at least through September of 1977.
29
The factors underlying the present controversy as to the methodology of identifying and measuring organic pesticides are threefold: the complexity of the process, the high degree of elimination of pollutants required by the regulations, and the penalties for non-compliance. 33 U.S.C. § 1319. Petitioners point with dismay to the analytical obstacles, pitfalls, and limitations which EPA acknowledges and warns against,17 and challenge the reliability and adequacy of both GC and TLC. They further document their dismay by criticizing ESE for lack of an articulated quality control program; criticizing specific instances of ESE's work; noting the wide discrepancies between analyses of the same samples by several manufacturers and by ESE; and challenging the inclusion of a requirement based on chemical oxygen demand (COD) as not being feasible or useful.
30
The considerations governing our task of review in such a case as this have been recently illumined in Weyerhaeuser Co. v. Costle, at 1025, where Judge McGowan, writing for the court, said:
31
"In light of the structure and aims of the Act, and the breadth of authority delegated by it to the EPA to identify highly sophisticated control technology in an area fraught with scientific uncertainty, our review function encounters significant limitations in the substantive aspect where the given statutory standards are 'arbitrary,' 'capricious,' or 'abuse of discretion.' First, it is elementary that our function is not to weigh De novo the available evidence and to substitute our judgment for that of the Agency. Second, an expansive concept and exercise of the review power in the eleven Courts of Appeals charged with that function could easily impede accomplishment of the Act's ambitious pollution-ending aspiration as well as its goal of industry-by-industry uniformity. See generally, Currie, Judicial Review Under Federal Pollution Laws, 62 Iowa L.Rev. 1221, 1261-71 (1977). This problem looms larger in the substantive area of review than it does in those areas involving statutory interpretation and procedural integrity because of the technological and scientific uncertainty that EPA must overcome as best it can in making the discretionary judgments delegated to it by Congress. There are also obvious limitations upon the capacity of courts to deal meaningfully with arcane areas of knowledge of this kind."
32
After quoting from the court's earlier opinion in Industrial Union Dep't v. Hodgson, 162 U.S.App.D.C. 331, 338-39 n. 18, 499 F.2d 467, 474-75 n. 18 (1974) ("Where existing methodology or research in a new area of regulation is deficient, the agency necessarily enjoys a broad discretion to attempt to formulate a solution to the best of its ability on the basis of available information."), Judge McGowan summarized the court's view of its mission:"In these circumstances, therefore, we will be content in carrying out our substantive review (that is, assuming the statute and the requisite procedures have been followed), first, to insist upon an explanation of the facts and policy concerns relied on by the Agency in making its decision; second, to see if those facts have some basis in the record; and finally, to decide whether those facts and those legislative considerations by themselves could lead a reasonable person to make the judgment that the Agency has made. See Citizens to Preserve Overton Park, Inc. v. Volpe, supra, 401 U.S. (402) at 416, 91 S.Ct. 814, 28 L.Ed.2d 136; Amoco Oil Co. v. EPA, 163 U.S.App.D.C. 162, 180-181, 501 F.2d 722, 740-41 (1974); Industrial Union Dep't v. Hodgson, supra, 162 U.S.App.D.C. 331, at 339-40, 499 F.2d 467, at 475-76." Weyerhaeuser, at 1026.
33
With these precepts in mind, we consider petitioners' challenges.
34
The first is to the reliability and adequacy of the two basic methods endorsed by EPA, gas chromatography and thin layer chromatography. Petitioner's general attack is based, as we have noted in note 17, on the acknowledged uncertainties attending the successful use of the methods in dealing with complex mixtures. It seems to us that EPA's cautions are to be preferred by far to overclaiming or overselling. It also seems to us that action of this nature, although not without risk to manufacturers, is preferable to no action at all. We are mindful of the fact that Congress contemplated a certain amount of "technology forcing", Weyerhaeuser, at 1057, expecting EPA "to press sometimes beyond the most advanced technology currently being used". Id. at 1061. Here, there is no claim that the technology has not been developed but merely that EPA has overstated its public acceptance. If the issue were whether the American Society for Testing and Materials (ASTM) and the American Public Health Association (APHA) Had approved GC methods For testing all three classes of organic pesticides for which EPA claims GC to be appropriate, EPA might lose. But it seems clear to us, from the literature, including the series of manuals and handbooks dealing with both GC and TLC going back at least to 1972, and from the fact that several EPA test methods for organic pesticides have almost completed running the gamut of ASTM and APHA approval processes, that any a priori attack on the methods must fail.
35
This leads us to more specific criticisms. The most sweeping of these is petitioners' claim that ESE, so far as the record discloses, pursued no systematic and reliable quality control procedures in running its tests on samples of effluent. In its initial form the argument was that the many steps18 prescribed in the Chemistry Division and Radiochemical Laboratory Quality Assurance Manual, which ESE itself developed, were not followed. EPA's response, that this Manual was in preparation during most of the time ESE was running its tests, seems sufficient to us.19 Petitioners counter that whether judged by the new Manual or the 1972 Handbook, ESE's procedures were nowhere described or approved by EPA. This seems to be true. Were the project for which ESE was engaged that of applying standard technology to routine operations, we might expect to find a pre-established testing procedure. But here part of the task was to find and develop the appropriate testing technology, resulting in the new Quality Assurance Manual.
36
ESE came on the scene after a prior contractor had been found inadequate. It obviously had a mandate to produce scientifically acceptable work; EPA had demonstrated its reaction to inadequacy. Between late 1976 and the fall of 1977 ESE invested 16,500 man hours in this rulemaking process. (App. 1491) As we have noted, all of its working papers, totalling 2000 pages have been turned over to petitioners. The specific criticisms we shall later discuss are the total harvest of hindsight. Most, we think, are answered satisfactorily by EPA; some are ignored. We find ourselves, as a reviewing court, dealing with adversaries who deal with the issues on different levels. Petitioners have combed the record to select what they deem to be errors or examples of sloppy work. EPA, on the other hand, seems to have adopted a rather bland approach, selecting only what it views as important challenges, and giving them a minimum response.
37
The issue of ESE's quality control standards offers an example of these diverse approaches. Petitioners decry the absence of a description of methods, quality control charts, the failure to prepare a "reproducible standard curve", the failure to run an adequate number of standards, an inadequate number of spiked and "method blank" samples, and duplicate analyses insufficient in quantity and quality. Their citations to the record are few. EPA's response to this range of criticism is largely set forth in the following footnote language in its memorandum responding to petitioners' reply brief: "Complaints of inadequate numbers of standard and spiked samples are refuted by laboratory documents supplied petitioners pursuant to the Court's request at argument."
38
We have therefore conducted our own review. It was restricted to 238 pages of ESE documents (App. 3352-3590). It was necessarily superficial, since we are not laboratory technicians, since the function of the various forms and entries was often not self evident, and since many of the forms were illegible, some were apparently duplicates (App. 3469, 3470; 3413, 3556) or triplicates (App. 3363, 3474, 3582), and a sizeable number were upside down. We found frequent evidence that ESE testing had involved the running of duplicates,20 standards,21 blanks,22 and spiked samples.23 Occasionally we found apparently careful step-by-step instructions for performing tests (App. 3352, 3505); notations that a test was defective and ought to be repeated (App. 3476, 3502); remarks that samples had been lost (App. 3414, 3431) or that the recording pen had jiggled in several chromatograms (App. 3412); and interpretive remarks noted in December, 1978, apparently for use of petitioners (App. 3432, 3487-3489, 3491-3492, 3495). We have also read ESE's monthly progress reports to EPA and see evidence of concern for careful procedure. (App. 1453, 1455, 1456, 1460, 1461).
39
We cannot be sure that these references are an adequate response to criticisms levied at ESE's general control procedures. But we cannot play the role of Superchemist.24 Petitioners bear an extremely heavy burden if they desire to demonstrate that the results of a rulemaking procedure are infected with fatal flaws of laboratory practice. Our review, partial and facial though it is, satisfies us of the probability that EPA was justified in basing its regulation on ESE's work.
40
Our feeling is strengthened by our review of some of the specific instances of alleged error in results charged by petitioners. They have pointed to the wide divergence of the analyses conducted principally by manufacturers Rhom and Haas and Eli Lilly and those performed by ESE on "split" samples of the same waste water. ESE consistently found much higher quantities of pesticide in the samples. As we have indicated above, we have not found sufficient reason to reject ESE's analytical procedures or results. And, while the methods generally used by the companies were sufficiently reliable,25 we know nothing of the procedures actually used by the companies in taking and preserving these samples. We therefore cannot say that the divergence of results indicates error on the part of ESE. Moreover, of course, rejection of the lower figures is to the ultimate advantage of the companies, increasing the allowable discharge.
41
Petitioners also focused on what first appeared to them as a "patent error" in ESE's calculations of the amount of waste water used in a test, amounting to more than a 55 gallon drum. But this turned out to be correct, EPA saying that the sample was so polluted that it had to be diluted 250,000 times. Petitioners noted two strip charts for sample 9010, speculating that a "shoulder" indicated interference and that a peak which ran off the paper could not be only 3.6 centimeters high. But EPA counters by saying the first peak was so pesticide-laden that it did indeed run off the paper, but that the Rerun was indeed 3.6 centimeters high. The supposed interference denoted by the shoulder was the occasion for the technician's comment we have noted concerning the jiggling of the recorder pen. App. 3412. Other charges were that two strip charts supposedly representing duplicate analyses were not "remotely comparable" the response being that they were successive analyses with the differences due to the large amount of pesticide present in the early extractions; that ESE improperly used higher influent numbers ascertained by a Perkin-Elmer instrument with no explanation for rejecting the lower numbers obtained by a Varian instrument the reply being that each instrument is more effective in different ranges of numbers. Although petitioners have a retort in each such instance, we must say that EPA clearly has the better of these arguments.
42
There are other even more minor issues where we confess that we are not sure of the winner whether as to a particular analysis, a standard strip chart should have been verified, whether ESE's injections were too little in volume, whether the lack of confirmatory tests on alternate columns of different polarity was significant. As to these and other issues, EPA either did not respond or did not do so at sufficient length to be understandable. But we have said enough to indicate that residual doubt on issues of increasing minuteness is far from sufficient to cause us to interpose a different judgment than that exercised by the Agency in choosing to rely on its contractor.
43
Petitioners have raised one additional issue of a substantive technical nature in challenging EPA's choice of COD as a parameter. The contention is that it serves no purpose where wastes possessing large amounts of salts are to be dealt with. Diamond Shamrock's data are said to be of doubtful validity. But without such data, leaving only that developed by Monsanto's Muscatine and Anniston plants, the standard would be even more stringent. Wholly apart from absence of prejudice, EPA points to the wide use of COD in industry as a measure of long term biochemical oxygen demand and a comment from Olin that "(I)t is a mystery why the Agency feels compelled to establish a limitation on BOD when COD measurements are more feasible." C.App. 212.26 We cannot, in the words of the court in Weyerhaeuser, slip op. at 23, say that "a reasonable person (could not) make the judgment that the Agency has made."
44
C. EPA's Determination of Best Practicable Control Technology Currently Available
45
Even accepting the work of ESE as accurate, petitioners argue that the results do not support EPA's conclusion that carbon adsorption and hydrolysis are effective technologies for pre-treating pesticide waste streams to remove organic pesticide chemicals. Closely related to this challenge are the arguments that the numbers with which EPA calculated the final effluent limits were inaccurate, thus invalidating those limits, and that EPA could not reasonably combine all manufacturers of organic pesticides into one category required to meet the same limits. EPA's decision that by using the model technology, including either carbon adsorption or hydrolysis, all plants achieved "similar" pesticide content in their effluent led EPA to conclude "that the waste waters of all organic pesticide chemicals can be treated or controlled to the levels documented in the Agency's data base." 43 Fed.Reg. 17777 (1978).
46
In carbon adsorption, the organic molecules reach the surface of the carbon where they diffuse into the carbon's porous structure and bind with the carbon. The molecular structure and solubility of the pesticide influence its adsorption characteristics. Periodically the carbon becomes saturated and requires regeneration which can be accomplished by incineration. The resulting flue gases are quenched, scrubbed, and discharged to the atmosphere. The carbon can then be reused, although its adsorptive capacity will be somewhat reduced.
47
Hydrolysis is a chemical process in which the pesticide compounds are broken down by adding a caustic (or an acid) to the waste water setting off a reaction with the water and the organic compounds. The hydroxyl or hydrogen ions attach to some part of the pesticide chemical molecule, either displacing part of the group or breaking a bond so that two or more new compounds form. The success of hydrolysis is a function of the temperature and pH (relative acidity or alkalinity) of the solution and the properties of the chemical. Some compounds hydrolyze relatively easily compared to others. The ability of a compound to be hydrolyzed can be measured in terms of the half-life of the reaction, the time it takes at a given temperature and pH to hydrolyze half the chemical present. The shorter the half-life, the easier it is to destroy the pesticide through hydrolysis.
48
The regulations do not require the use of any particular treatment technology so long as the effluent limitations are met. One of the premises of the regulations, however, is that by using either carbon adsorption or hydrolysis, together with equalization and biological treatment, any plant could meet the regulations. Petitioners argue that there is no basis for this conclusion and that, therefore, we should remand the regulations as to the organic pesticides category. They suggest that the data collected at operating facilities are unrepresentative, inaccurate, and insufficient to demonstrate that those facilities achieve the results EPA claims; that even if those facilities do achieve the results claimed there is no data to suggest other plants producing other pesticides could achieve comparable results; and that EPA's references to literature and pilot studies fail to support its conclusion.
49
We emphasize again that our review of agency rule-making is very limited, especially where the Agency must overcome technological and scientific uncertainty in making its delegated discretionary decisions. See Weyerhaeuser, at 1025. We will not remand so long as the Agency has explained the facts and policies on which it relied; the facts have some basis in the record; and a reasonable person could make the judgment the Agency made. Id. at 1026. Thus, the petitioners carry an extremely heavy burden when petitioning for review in such a case as this.
50
EPA identified eight full-scale carbon treatment systems used to reduce pesticides and five full-scale hydrolysis systems. The Agency sought information on all these facilities. One of the plants using carbon adsorption (one of the petitioners before us) disclosed neither the operating conditions of the system nor individual analyses of its effectiveness. Information on the remaining 12 systems is presented in great detail in section VII of the Development Document. Five of the seven carbon systems achieve removal rates in excess of 99 per cent of the influent pesticide as do two of the three hydrolysis systems for which data is available as to the pesticide content of both the influent and effluent of the treatment system. The two hydrolysis systems, for which only effluent data is available reduced the pesticide level to less than 1 mg/1 (one part per million) and to below the detection point respectively. EPA has concluded that the two substandard carbon systems and one sub-standard hydrolysis system could all achieve much better results by adjusting the operating conditions of the facilities (replacing the carbon more often or holding the waste water in the treatment system for a longer period).
51
Petitioners attack the use of data from the carbon systems because the systems were not designed to remove pesticides. This attack is trivial. EPA faces a severe problem in regulating the pesticide industry because a great deal is not known about treatment of pesticide waste waters and because the industry is very reticent about revealing what it does (or could) know. Given this admitted information shortage EPA must make use of the information it has, recognizing the limits of the information; EPA cannot refuse to carry out its mandate, waiting for the day when it might possess perfect information.27 Whatever reasons industry might have had for installing carbon treatment systems, if those systems are effective at removing pesticides then EPA can and should make use of that information. The alternative would be to ignore the mandate of the Federal Water Pollution Control Act and allow the pesticide industry to develop treatment systems at its own pace, releasing information about those systems only for the purposes and under the conditions the industry might see fit. Congress has rejected that alternative.
52
The same answer applies to petitioners' claim that the data on carbon treatment systems were too sparse to support any conclusion about their effectiveness. EPA had no more than 25 observations at any given facility and as few as 4 observations at another. EPA used all the data it could accumulate. Had the industry come forward with more data there is every indication that EPA would have used it. Data on the performance of the treatment systems are entirely within the control of the industry. We will not hear industry complain that EPA used insufficient data when industry was uncooperative in supplying the missing data. It was up to EPA to decide whether the limited data base was sufficient to support the conclusions reached. We hold that deciding to base conclusions on the limited data available was a reasonable exercise of discretion given the regulatory mandate.28
53
Petitioners suggest that even the limited data available at three of the carbon treatment plants are unrepresentative because the data were collected too soon after replacement of the carbon columns or because some wastes bypassed the treatment system being studied. The sampling at Eli Lilly covered the first 4 days of a 7 day carbon cycle. The record does not reveal why the carbon was changed just before sampling began or whether either ESE or Lilly timed the change purposely. The data, however, covered more than half the cycle, and the record reveals that the results obtained during the ESE sampling period were, if anything, unrepresentative on the high side since they showed a higher concentration of pesticide in the treatment effluent than the company found in its own studies. C.App. 217. The sampling at Hardwicke was done early in that company's normal 30 day carbon cycle, but, as EPA noted, the carbon should be changed far more frequently and the sampling was fairly representative of what would have been a reasonable carbon cycle for the plant.
54
Petitioners also argue that Lilly and Olin generated waste streams containing pesticides that did not pass through the treatment systems. Their citations with regard to Lilly are unconvincing. The direct communication from Lilly says nothing about a pesticide-bearing waste stream by-passing carbon treatment. The MITRE study does not support the claim. It says that the only two waste sources containing the pesticide may be combined prior to treatment. C.App. 206. We find no indication that the "Floor drains, Cooling waters, and Miscellaneous Waste Streams" contained any pesticide. C.App. 207.
55
The problem with respect to Olin is not so easily disposed of. On March 15, 1977, Olin submitted its comments on the interim final regulations. It stated that EPA's data omitted "supplementary waste streams containing some process waste waters." C.App. 213A. An attachment to these comments described the supplementary waste streams as including "among other things, spills, wash-downs, vent scrubber effluents, and surface runoff. In this wastestream, the following waste by-product streams are not included: 1. PCNB Plant Hydrochloric Acid; 2. PCNB Plant Spent Sulfuric Acid; 3. TCAN Plant Hydrocholoric Acid." C.App. 213A. Finally, this letter stated as "basically an intelligent guess" that 1.3 pounds of pesticide were in the supplementary waste stream (not including "TCAN, HCL, PCNB HCL and PCNB spent nitration acid."). EPA visited Olin's plant on August 17, 1977. According to a memorandum of that visit, "(p)lant personnel were unable to provide back-up information supporting the revised waste load estimates reported to EPA in a letter from Olin dated March 15, 1977. They agreed to provide the basis of these revised waste loads upon receipt of a letter from EPA." C.App. 304. On August 18, 1977, EPA sent a letter to Olin seeking, inter alia, more information about the supplementary waste streams; confirmation that "these supplementary waste streams have not been, and are not currently being treated by activated carbon, but rather are neutralized and discharged"; and confirmation that the existing "waste byproduct streams" (the acid streams) were being reused or sold. App. 2625-26. Olin answered by letter of September 14 that it had no additional data on raw waste load (other than some flow rate data); that "(t)he supplementary waste streams associated with the PCNB Plant are currently only being neutralized"; and that "(t)he information you have outlined for the current disposition of the three by-product acid streams is correct." C.App. 352-53.
56
EPA's response to petitioners' argument is that "(t)he truth as acknowledged by Olin, is that there are no (unaccounted for) streams." EPA brief at 62. EPA's brief-writers misread the exchange quoted above. They interpreted Olin's acknowledgement that the three acid by-product streams were not being discharged as meaning that no supplementary waste streams were being discharged. A clear distinction was made at all times in the exchange of correspondence between the acid "by-product waste streams" and the pesticide-bearing supplementary waste stream. The latter is clearly the one of concern, and Olin clearly stated that it was being discharged with no treatment other than neutralization.
57
The implication is that Olin was discharging more pounds of pesticide per thousand pounds of production than the figure EPA used in calculating the limits, and, therefore, the limits were miscalculated and should be corrected.29 The treatment given the issue in EPA's brief leaves us uncertain how to handle it. On the one hand, we might be inclined to discount an "intelligent guess" about extra pesticide when no supportive data is forthcoming despite the Agency's follow up efforts. On the other hand, though, EPA has not explained the basis for ignoring the new information, and EPA's brief deals with it on an inaccurate basis.30 Under these circumstances we feel compelled to remand the regulations for consideration of petitioners' claim that the Olin data should not be used in calculating the final effluent limits. It may be that EPA can easily correct any defect, but we must put them to the task.
58
Similar arguments are directed against plants EPA used to illustrate hydrolysis treatment. Petitioners object to reliance on two plants claiming that in fact neither has an hydrolysis system. In fact the record reveals that both plants hydrolyze the wastes, albeit not in separate hydrolysis basins. Kerr-McGee adds a caustic to elevate the pH above 11 and elevates the temperature to facilitate the reaction. App. 991. Monsanto's Anniston plant similarly sets off a reaction with addition of caustic to raise the pH, App. 2459, though the temperature is not raised. App. 126-27. In effect, hydrolysis and biological treatment occur simultaneously. Although there may be some problem in attributing the destruction of the pesticide to one or the other cause, both treatments are recommended, and the success of these systems is relevant to whether companies can meet the guideline limits31 and supports the conclusion that hydrolysis is being used successfully in the industry. The same holds true for Shell's Axis plant. Though there is no influent data, the effluent data indicates that with the hydrolysis system the discharge of pesticide can be reduced below the detection point.
59
Petitioners argue that even the plants for which EPA has operating data are far from "similar" since, for instance, their pesticide output varies between 0.0000765 and 0.00315 kg/kkg. This is indeed a rather broad range, but it does not disturb us. The Act imposes no obligation on EPA to subdivide industries so that each point-source category contains identical producers. The development document reveals that EPA carefully thought about the relevant factors when it divided the pesticide industry into three categories. App. 57-61. It had tried to subdivide the organic pesticides into three subcategories, and that attempt was shown to fail. In fact, as we have noted, industry commenters demonstrated that those three subcategories were indistinguishable from each other and that that subcategorization scheme was inequitable. After further study EPA concluded that there was no reason to use subcategories at all. The advantages would be negligible since there were no clear dividing lines between groups of manufacturers, and the disadvantages, as pointed out by the industry, were significant. Under the circumstances we cannot say it was unreasonable for EPA to reject industry's advice that the fewer than 30 direct dischargers of organic pesticides be divided into more than one category. Certainly we see no congressional mandate that this industry be further subcategorized.
60
Having decided to use a single category, EPA had to set the limits for it. Its decision to use only data from full-scale operating systems and to ignore zero-discharge plants was well within its discretion. Thus it needed a way to express the limitation more precisely than a requirement such as that all plants "do as well as the plants we have surveyed". It needed to express the results of the survey data as a number typical of the model group that is, an average. Averaging the effluent data from the model plants is very different from averaging apples and oranges or bananas and marshmallows. If the plants performed identically, no average would be necessary. Though the plants performed differently, even very differently, we cannot see why averaging is unacceptable. The same parameter was measured in the same way and in the same units. The set of observations thus derived made up the population of which an average was desired. The problem, as we see it, was not whether an average could be taken, but how to derive that average.32
61
EPA chose to calculate a weighted average that gave equal influence to each observation rather than to each plant. Thus the plant with 4 observations had far less influence on the final average than the plant with 450 observations, but each observation at the two plants had exactly the same influence. We are sure there were many alternatives to this system, but we cannot say that EPA went beyond its discretion in picking this one. We agree with the Fourth Circuit that "the choice of statistical methods is a matter best left to the sound discretion of the Administrator." FMC Corp. v. Train,539 F.2d 973, 986 (4th Cir. 1976); American Petroleum Institute v. EPA,540 F.2d 1023, 1035 (10th Cir. 1976). The choice of any given method may mean that an alternative method would yield different results. The necessary corollary, however, is that any other system chosen would be open to the same criticism. We will not leave the Agency so vulnerable.
62
Even if the plants studied demonstrate that carbon or hydrolysis treatment is effective for the pesticides they produce, petitioners point out that they produce only a small minority of the 49 pesticides whose discharge is controlled. This is true, but it hardly means that the regulations must be limited to those pesticides for which EPA has collected information on operating treatment systems or even to the larger group of pesticides currently being treated by adsorption or hydrolysis.33 There is literature data which suggests that other pesticides are amenable to treatment. See note 27, Supra. Also, the Agency is entitled to use its chemical expertise to conclude that compounds' manufacturing processes, chemical structures, and physical properties are sufficiently related so that if one is treatable the others are likely to be as well.34 Certainty is not required. It is enough that the EPA has considered the problem and that the petitioners have failed to convince us that the conclusion is unreasonable.35 Petitioners have presented no evidence that any particular regulated pesticide is not amenable to treatment. Moreover, we assume that if any plant had evidence that an adequate, properly run treatment facility corresponding to EPA's recommendations could not achieve the guideline limits, the plant would have a strong case that it is "fundamentally different" and entitled to less stringent limitations. 40 C.F.R. § 455.22, 43 Fed.Reg. 17780 (1978). We conclude, with the one reservation expressed above, that the Agency has demonstrated that hydrolysis and carbon adsorption are currently used, effective pesticide treatment techniques; that the Agency permissibly decided that the techniques are broadly applicable to facilities manufacturing the 49 pesticides discharge of which is regulated; and that it was within the Agency's authority to require all manufacturers of organic, non-metallo pesticides to meet the same effluent limitations.
D. EPA's Consideration of Cost
63
The Act requires EPA's assessment of best practicable control technology currently available to "include consideration of the total cost of application of technology in relation to the effluent reduction benefits to be achieved." 33 U.S.C. § 1314(b)(1)(B). Cost, however, is not a paramount consideration. Congress "self-consciously made the legislative determination that the health and safety gains that achievement of the Act's aspirations would bring to future generations will in some cases outweigh the economic dislocation it causes to the present generation." Weyerhaeuser, at 1037. The obligation the Act imposes on EPA is only to perform a limited cost-benefit balancing to make sure that costs are not "wholly out of proportion" to the benefits achieved. A Legislative History of the Water Pollution Control Act Amendments of 1972 170 (1973) (statement of Senator Muskie); Weyerhaeuser, at 1045 n. 52. Thus, the balancing is a relatively subsidiary task and need not be precise.36 Weyerhaeuser, at 1049. The Agency has considerable discretion to decide how to go about considering costs and benefits and need not "perform the elaborate task of calculating incremental balances" of marginal costs and benefits.37 Id.
64
We are satisfied that EPA has done an acceptable job in this case. Facing a highly diverse industry, and struggling with an admitted dearth of information (for which not without some justification it blames the industry), EPA sought to determine on a plant-by-plant basis the capital and operating costs each plant would incur in meeting the effluent limits. EPA found only seven direct dischargers that would incur additional costs.38 Of these, EPA predicted five faced increased annual costs equal to only 0.2 to 2.0 per cent of revenues from pesticide chemicals and would not change employment or production. A comparable estimate could not be made for one other, and the last one would face costs of 3.6 per cent of revenues. EPA concluded that the latter two might experience reduced profitability but would continue in production. Capital costs were expected to total $9.9 million and annual costs $5.1 million for the industry. 43 Fed.Reg. 17777-78 (1978).
65
The Agency based these estimates on model treatment techniques assuming a variety of plant sizes and treatment difficulties. The petitioners criticize the estimates and their application to plants on a variety of grounds. Though many of the criticisms may be valid, suggesting that the estimates are not perfectly accurate, none of them convince us that EPA's evaluation of costs must be rejected. There is no way the cost analysis could be more than an estimate, especially given the reticence of the industry to supply information, and EPA needed to develop no more than a rough idea of the costs the industry would incur. On the basis of its estimates, EPA decided to promulgate these regulations. We cannot say that the Agency has failed to consider costs in relation to benefits, and we find no basis on which to overrule EPA and decide that costs are wholly out of proportion to benefits.
II. Metallo-Organic Pesticide Manufacturing
66
Subpart B of the regulations is "applicable to discharges resulting from the manufacture of metallo-organic active ingredients containing mercury, cadmium, arsenic, or copper." 40 C.F.R. § 455.30; 43 Fed.Reg. 17786-87 (1978).39 The regulations forbid any discharge of process waste water pollutants to navigable waters. 40 C.F.R. § 455.32. The only challenge is from one of the three manufacturers of arsenic-based pesticides, Diamond Shamrock. Diamond Shamrock alleges that its process requires it to discharge arsenic contaminated waste water and that the record fails to support EPA's conclusion that a process with no discharge is the best practicable control technology currently available.
67
Diamond Shamrock has twice in the past reported that its arsenic manufacturing process had no discharge of polluted waste water. In August, 1975, it reported to EPA that its "process has a negative water balance (and is) able to utilize essentially all, including rainwater from the process area, in the product." A 1972 report stated, "The arsenical unit has no discharge its design is such as to recycle all waters into the final product." Other reports, however, are either ambiguous or assert that Diamond Shamrock in fact discharges contaminated waste water. A 1974 study reported, "Diamond Shamrock's plant is a 'low effluent' plant, although they do discharge aqueous waste. . . . (T)he discharge of arsenic averages about 0.7-0.8 (parts per million). . . . The total amount of arsenic discharged amounts to only about 1/2 lb per day."40 In July and August, 1977, Diamond Shamrock told EPA and ESE during a meeting and during an inspection of the plant that it discharged waste water and could not meet the limit in the interim regulations. Data covering January through May of 1977 show that there is arsenic in the waste water discharged from the arsenic process to the biological treatment facility and in the discharge from the treatment facility. Flow charts describing Diamond Shamrock's production process show that waste water can be recycled, but suggest that some is not. Finally, ESE's notes of an April 26, 1976, telephone conversation between an ESE researcher and a Diamond Shamrock plant manager reveal that the plant manager admitted that arsenate production has no waste but also said the plant could not meet a limit of 0.1 parts per million.41
68
Though the record is far from clear, it indicates to us that, while Diamond Shamrock may once have been a non-discharger, at least as of the time these regulations were promulgated the plant was discharging pollutants and had so advised EPA. This does not, however, end the inquiry. The fact remains that the other eight manufacturers in the metallo-organic subpart, including the two other producers of arsenic pesticides, achieve zero discharge and have not joined the petition for review,42 and Diamond Shamrock held itself out as a non-discharger on some occasions.
69
Diamond Shamrock's attempts to refute EPA's evidence concerning the other plants are unpersuasive. The evidence consists of notes of phone conversations between ESE and officials at the other two arsenic plants, Vineland and Ansul. According to the notes, Vineland's chief chemist claimed all waste water is recycled to the process, and the Ansul official said, "All wastewater from the pesticide production is reused in the process; the only discharge is of non-contaminated cooling water." Though transcribed notes of phone calls are not the best possible evidence, it seems that EPA confronted stern industry resistance in its attempts to put together a more reliable data base. Industry cannot be allowed to profit from the success of its resistance to regulatory inspections. Moreover, in proceedings such as these EPA has to be able to rely on industry-supplied information, especially where dishonesty would be counter-productive for the informants.
70
It appears that the industry can and does produce arsenic-based pesticides without discharging polluted waste water. The statute, though, requires more; EPA must consider specific factors including "the total cost of application of technology in relation to the effluent reduction benefits to be achieved . . . , and . . . the process employed, the engineering aspects of the application of various types of control techniques, process changes, (and) non-water quality environmental impact . . . ." 33 U.S.C. § 1314(b)(1)(B). EPA's excuse for not considering these factors is that Diamond Shamrock does not now, or at least did not in the past, discharge polluted waste water, therefore it would not have to change its process or incur any costs in meeting the regulations.43
71
The record as we construe it does not support EPA's reasoning. Diamond Shamrock is now a discharger. It will have to change something, whether in its production process or its treatment process, in order to meet the regulation. EPA must give some consideration to the cost and impact, if any, of implementing these changes and compare the cost to the reduction benefits. Until it has performed that task, EPA has not discharged its statutory responsibilities. Having failed to consider the relevant factors, EPA abused its discretion, and we must remand.
72
As indicated in our discussion of the required cost analysis above, the consideration may be general, and EPA has considerable discretion to determine the scope of the investigation. We also emphasize that our remand on this issue is a limited one to give EPA an opportunity to perform the statutorily mandated assignment. If EPA discovers that in fact Diamond Shamrock will not incur costs or that the benefits of the regulation are not wholly out of proportion to the costs to the industry, then we will be prepared to uphold the regulations as written.
III. Formulators and Packagers Subcategory
73
Subpart C of the regulations apply to formulators and packagers of pesticides. 40 C.F.R. §§ 455.40-455.42. This segment of the industry, encompassing approximately 5300 companies, mixes technical grade pesticide chemicals with inert ingredients by dry-based, solvent-based, or liquid-based processes to produce usable commercial products. These companies are required to release "no discharge of process waste water pollutants to navigable waters". 40 C.F.R. § 455.42. EPA expects them to meet this limit by a combination of in-process controls and collection and evaporation of whatever waste water cannot be avoided. NACA, on behalf of the formulators and packagers, has intervened in these petitions for review to challenge the no discharge limitation on a number of grounds. NACA argues that EPA's data base is so inconsistent, inaccurate, and incomplete that it cannot support any conclusion and that even taking the data base at face value it does not support the conclusion EPA has reached. Further, NACA argues that EPA has failed to meet the statutory mandate to consider certain factors. 33 U.S.C. § 1314(b)(1) (B).
74
We agree with NACA that EPA's treatment of this industry segment is not a model of administrative regulatory methodology, but, nonetheless, we find sufficient reliable data in the record to support EPA's conclusion that zero discharge is the best practicable control technology currently available for this category. We rest this conclusion on two sources of data with respect to the reliability and value of which EPA and NACA nearly agree.44 The first of these is a telephone survey conducted by ESE. ESE polled, at random, a segment of the industry,45 and compiled 47 responses.46 Of these 47, only 3 discharge process waste water pollutants into navigable waters. Another 8 discharge waste water to privately operated treatment facilities, but such discharges would not run afoul of these regulations.47 Thus, 94 per cent of the companies currently can comply with these regulations, and 77 per cent are not discharging any process waste water at all.
75
These results are confirmed by the second source, a report compiled by a contractor hired by NACA and submitted to EPA by NACA. The report's conclusions included the following:
76
"Some plants are currently operating with no discharge of process waste water. By conservative water usage and improved housekeeping practices, most plants can either eliminate or significantly reduce the volume of process waste water generated."
77
"The best practicable control technology currently available for most plants in the industry appears to be an evaporative system having no effluent. For those plants that cannot effect complete evaporation of their process waste water, partial evaporation in conjunction with disposal in an approved landfill appears to be the best alternative."48
78
This study contacted 105 companies, getting 91 usable responses. Of these 91, 66 discharged no waste water. Only 5 discharged directly to navigable waters, and another 20 discharged to private treatment facilities or practiced deep well injection or ocean dumping. Thus 73 per cent of the companies have no discharge at all, and 95 per cent comply with these regulations. The results are virtually identical to ESE's results. Whatever the failings of these studies, the numbers clearly show that the great majority of formulators already meet the limitations, and it follows that meeting the regulations is practicable for the industry looked at as a whole.
79
NACA does not seriously dispute that conclusion. Rather NACA suggests that we should not rely on the numbers at all and that the category should not be looked at as a whole. NACA attacks the methodology of the ESE survey because two different survey forms were used, those were not completely filled out, the results have been inconsistently reported, and the survey failed to generate any information on the effectiveness of any pre-discharge waste water treatment systems. Neither we nor EPA rely on this survey for anything beyond the information that was collected the company's formulating process and whether or not it generated or discharged process waste water. That other questions were not asked or answered is for this purpose irrelevant. Similarly, that the survey results have been inconsistently reported is of no matter so long as the final tabulation is accurate. NACA challenges the survey it submitted because that survey was not designed to serve the purpose for which EPA used it, was hastily done, and left many questions unanswered. Again, our use of it, like EPA's, is only for the results it did collect, not for whatever it may have failed to determine.
80
NACA next suggests that the formulating category should have been broken into two subcategories because EPA's first contractor, Weston, so recommended and because it is "obvious . . . that formulators whose very operations involve the use of water and other liquids will generate wastewater and cannot achieve zero discharge." EPA was in no way bound to accept its contractor's suggestion. Our inquiry is only whether the solution EPA did adopt is rational and supported by the record.
81
The ESE survey collected information on the type of process used as well as waste generation and discharge.49 The survey does not support NACA's assertion that plants using water-based processes inevitably must discharge process waste water. Of the 47 responding facilities, 20 produce liquid-based pesticides. Of these 20, only 2 run afoul of these regulations by discharging process waste water directly to navigable waters. An addition 8 facilities discharge waste water to private treatment facilities. Half the liquid-based formulators have no discharge at all. These numbers clearly show that even formulators using liquid-based processes can and do achieve zero discharge.
82
Given EPA's supported finding on the basis of the survey that the industry in large part achieved zero discharge, EPA did not need to go through the further steps of designating some number of these plants "exemplary" and averaging the zero discharge reports of the exemplary plants to set a zero discharge limit for the subcategory. To be sure, it might have been well for EPA to visit some of the facilities reporting zero discharge in order to verify the reports, but at some point EPA must be able to rely on information provided by industry, and here the companies had no incentive to report discharges below actual levels, thereby inviting regulations they could not meet.
83
We turn now to the factors the statute mandates that EPA consider. In particular, NACA argues that EPA has failed adequately to consider "non-water quality environmental impact" and "the total cost of application of technology in relation to the effluent reduction benefits to be achieved." 33 U.S.C. § 1314(b)(1)(B).
84
As we have said, the cost/benefit comparison mandated by Congress is "intended to limit the application of technology only where the additional degree of effluent reduction is wholly out of proportion to the costs of achieving such marginal level of reduction for any class or category of sources." Legislative History, Supra, at 170; Weyerhaeuser, at 1045 & n. 52. Congress did not intend cost to be an unwieldy barrier to attainment of pollution control goals. We have already explained the nature of our review.
85
EPA devoted significant effort to discovering the economic impact of these regulations on the formulating and packaging segment of the industry. Not only did EPA attempt to find out the number of companies that would have to incur new costs to comply with the regulations, but it also prepared estimates of the cost of compliance on the assumption that small, medium, and large plants would have to build evaporation treatment systems from scratch. NACA attacks these cost estimates on two fronts. The first is that EPA failed to consider adequately or accurately the cost of hauling waste water or sludge remaining after evaporation to a landfill. EPA's estimates are only for evaporation systems, not the alternative acceptable technology of hauling all waste water to a landfill. But evaporation is the more expensive of the two alternatives.50 Therefore, there was no reason to consider hauling separately. EPA further asserts that the cost of hauling the sludge left after evaporation is included in its assessment of annual "operating/maintenance" costs for the evaporation system.51 Though it might have been well for EPA to provide a more detailed itemization of its cost estimates, given the limited scope of our review, we will not impose any such mandatory duty. We have no basis on which to doubt the EPA's assertion in this regard.
86
NACA's second attack is that EPA used unrealistic estimates of evaporation rates. EPA used the median evaporation rate for the country in developing its estimates. NACA recognizes this by saying that the figure used "overestimates the annual evaporation rate for approximately half the nation" and "over half the pesticide formulation plants". EPA is entitled to look at costs on an industry-wide basis as opposed to plant-by-plant. To do so EPA must be able to make some assumption about the conditions facing the industry. Certainly, using an appropriately chosen average figure is a legitimate statistical technique, especially given that EPA is doing no more than developing rough estimates to help it determine whether the cost "is wholly out of proportion" to the benefit. Moreover, EPA notes that the evaporation tank volumes allotted are more than ample to accommodate the very slow build up of waste water that might accumulate where evaporation is significantly less than the national average. This build up can be hauled periodically to landfills.
87
Given EPA's determination that the cost of installing and operating an evaporation system would be acceptable even for a plant that starts with no system at all and that most formulators already comply with the regulations, EPA gave ample consideration to the comparison of cost with benefit. To be sure, the record contained only scanty data on the quantity of pollutants in formulators' waste water.52 On the other hand, EPA has discovered that the cost of compliance for the industry is small. Any discharges that trigger a requirement for a company to incur new costs must bear some pollutants, or they would not be illegal. Therefore, eliminating those discharges will produce benefits. This seems to be the implicit logic of the Agency, and we find it persuasive. It is rational to conclude that the small costs to the industry are not wholly out of proportion to the benefits. We must remember that the goal of the Act is to eliminate discharges of pollutants into navigable waters, and this effluent limitation accomplishes that goal.
88
The Agency must also "take into account . . . non-water quality environmental impact". The District of Columbia Circuit has held that this means the Agency must inform itself of the magnitude of potential problems and reach an "express and considered conclusion about their bearing". Weyerhaeuser, at 1045. The Agency has done so, though in a most cursory way. 43 Fed.Reg. 17776, 17780 (1978). The Agency noted that the major problem would be sludge and concentrated waste disposal. Though there is no specific finding of the magnitude of the problem and no express statement of conclusions, it is clear that EPA considered the problems and decided they were not of sufficient magnitude to prevent promulgation of these regulations. The Agency noted that it has published guidelines on solid waste disposal, 40 C.F.R. Part 241, and that it is in the process of developing regulations under the Resource Conservation and Recovery Act of 1976, 42 U.S.C. §§ 6901 Et seq., to regulate hazardous wastes.53 We infer that EPA concluded that waste disposal can be accomplished at an acceptable cost to the environment. As to air pollution EPA asserts in its brief that the Resource Conservation and Recovery Act regulations will deal with air pollution associated with disposal of hazardous waste. Though no detailed study appears in the record, the record reveals that EPA was aware of the problem, did not consider it significant, and felt that, where necessary, treatment could prevent air pollution. App. 1233. "(S)ince Congress intended EPA's internal structure to protect the non-water environment, the judicial function is completed when we have assured ourselves that EPA expressly considered the probable environmental impacts of its regulations." Weyerhaeuser, at 1053.
89
Finally, NACA challenges EPA's decision that plants which both manufacture and formulate pesticides must meet the limits for manufacturing plants with no credit for any discharge from the formulation process. NACA suggests that this will force combination plants to separate their waste streams because if combined the manufacturer will have to treat the waste water to levels better than those attained by BPT. As EPA points out though, most formulation processes do not generate or discharge waste water, including many at plants that also manufacture pesticides. Also, waste flows from formulation, where they exist, will be very small compared to the flow from manufacturing. As a consequence any burden on combined plants choosing to treat wastes together should be minimal. If that assumption proves wrong, of course, the plant retains the option of keeping the formulation waste separate and evaporating it or hauling it to a landfill. It seems eminently reasonable to us that if formulation plants are required to attain zero discharge, they should not be able to discharge extra pollutants simply because they happen also to manufacture pesticides.
90
Because of the minor problems noted above, the regulations must be remanded. We have no reason to believe that either of the reasons for this remand the misunderstanding concerning one company's reporting of the waste content of its discharges and the Agency's failure to consider the possible costs of implementing the regulations in the metallo-organic subcategory will pose a serious stumbling block to final approval of the regulations. Accordingly we will retain jurisdiction over these consolidated petitions for review so that we can bring a speedy conclusion to this case once the Agency has set the record straight and made whatever corrections it deems necessary.
So ordered.54
*
Of the District of Massachusetts, sitting by designation
1
The petitioners are BASF Wyandotte Corp., Diamond Shamrock Corp., FMC Corp., Olin Corp., American Cyanamid, Union Carbide Corp., E. I. duPont de Nemours & Co., Inc., Ciba-Geigy Corp., Monsanto Co., Dow Chemical Co., and Eli Lilly and Co
2
For a more thorough discussion of the statutory framework See Weyerhaeuser Co. v. Costle, 590 F.2d 1011, 1019-1021 (D.C. Cir. 1978), and cases cited
3
The interim regulations limited the phenol and ammonia content of discharges from some pesticide production plants. 41 Fed.Reg. 48088 (1976)
4
In the words of the Attorney General's Manual on the Administrative Procedure Act (1947), a contemporary explanation of the Act's purposes and provisions, "the notice should be sufficiently informative to assure interested persons an opportunity to participate intelligently in the rule making process." Id. at 30. Even where the Agency could publish the proposed rule itself, the Manual suggests that it may choose not to, issuing instead "a more general 'description of the subjects and issues involved.' " Id. at 29
5
The interim regulations included separate subcategories for manufacturers of Halogenated Organic Pesticides, Organo-Phosphorous Pesticides, and Organo-Nitrogen Pesticides
6
Respondent incorrectly read petitioners' procedural challenge as being limited to this change. BASF petitioners' brief clearly states other alleged deficiencies in notice:
"EPA should have exposed to public comment its decision to limit the regulations to those pesticides for which there are reliable analytical methods, its decision to adopt a single category for all organic pesticides, its determination that all pesticides can be treated to a single level regardless of differences in treatability of particular pesticides and its assessment of the applicability and effectiveness of carbon treatment and hydrolysis."
7
See, e. g., Comments of Mobay Chemical Corp., App. at 1753
8
Id., App. at 1772
9
Mobay, for instance, expressed its concern that the interim limitations "for the organo-phosphorus subcategory were based on prejudiced and . . . inequitable treatment when compared to the halogenated organics and organo-compounds (sic)." App. at 1755
10
For an example, see the comments of E. I. duPont de Nemours & Co., App. at 1915
11
It is ironic that petitioners should be attacking EPA's use of an expanded data base since a constant theme of their substantive attack on the regulations has been that EPA did not collect enough data to support the regulations
12
One of these plants, able to meet the limits without all the components of a recommended treatment system, was not explicitly relied on in developing the interim limit, but was mentioned as supporting the reasonableness of the limit set
13
The purpose of requiring notice is to generate responses as well as to hold agencies to adequate procedures. Where petitioners do not take advantage of chances to influence the agency we must look with less favor on those petitioners' allegations of inadequacy in the result. See Weyerhaeuser, at 1028 n. 15
14
To help illustrate, we think it apparent that had EPA made a serious arithmetical error in calculating the interim regulations so that the effluent limits were higher than they should have been if correctly figured, EPA would have been privileged to make the correction between proposal and final promulgation without submitting the revision for new comment
15
This case differs from Weyerhaeuser, at 1028-1031, because the Agency's final published explanation fully accounts for the limits set. There are no undisclosed numbers or factors on which the Agency must rely to support its final limits. See id. at 1030. The same calculations on the same factors were used for both the interim and final regulation, although the factors' values varied
16
Petitioners also complain about data from new plants being used to generate the final BOD and COD limits, but this was evidently because they misidentified one of the plants. In any case, substantially the same plants supplied the data for both the interim and final regulations
17
The introductory material in "Analytical Procedures" describing the application of gas chromatography to organochlorine pesticides contains such language as: "Under favorable circumstances, Strobane, toxaphene, chlordane (tech.) and others may also be determined"; "The usefulness of the method for other specific pesticides must be demonstrated by the analyst before any attempt is made to apply it to sample analysis"; when there are "complex mixtures, the individual compounds may be difficult to distinguish . . . . Provisions incorporated in this method are intended to minimize the occurrences of such interference"; "the method offers several analytical alternatives, dependent on the analyst's assessment of the nature and extent of interferences and/or the complexity of the pesticide mixtures found"; "This method is recommended for use only by experienced pesticide analysts or under the close supervision of such qualified persons"; "It is not possible to describe procedures for overcoming all of the interferences that may be encountered in industrial effluents."
18
These included a complete description in final project reports of methods used, a pre-established quality assurance plan for each project, the use of quality control input sheets and instrument log books, determination of maximum times for holding samples, documentation of ways in which samples were selected, calibration of instruments, frequent preparation of "linearity curves", frequent running of standards to keep track of changes on the performance of the equipment, and routine checks through running a blank (solvent extracted from distilled water) through the column, conducting duplicate analyses of the same waste water sample, and running "spiked" samples (waste water to which known quantities of pesticides have been added)
19
Petitioners point out that tests of one manufacturer, Olin, were not completed until after the Manual was fully revised. Their argument that failure of ESE to jettison its prior procedures and follow the newly promulgated Manual in conducting the very last tests on one plant's samples constitutes adequate basis for remand seems to us utterly unrealistic
20
Vol. 10, App. 3353, 3356, 3363, 3382, 3426, 3439, 3460, 3469, 3470, 3473, 3484, 3485, 3490, 3493, 3494, 3498, 3499, 3501, 3515, 3516, 3518, 3520, 3521, 3523, 3565, 3566, 3567, 3582, 3590
21
App. 3355, 3382, 3388, 3433, 3490, 3493, 3500, 3501, 3502, 3503, 3514, 3515, 3517, 3527
22
App. 3520, 3522, 3523, 3448, 3450, 3454, 3476, 3493, 3494, 3498, 3500
23
App. 3439, 3460, 3472, 3473, 3475, 3476, 3565
24
Here is an example of thrust and parry between chemists where we are being asked to give the final answer
Petitioners: ESE did not run duplicates for 4 or 5 plants relied on. (Main brief, p. 46)
EPA: It did, at all 4, citing appendix references. (Main brief, p. 56, n. 64)
Petitioners: But for duplicate samples to provide quality control over extraction and clean-up techniques, the duplicate samples must be independently extracted, cleaned up, and injected into the column. (Reply brief, p. 18)
EPA: But the samples were so laden with pesticide, that they had to be preserved in chloroform; this meant that when a sample container was opened, the whole sample would have to be used immediately. Hence ESE could run only injection duplicates. (Memorandum in response to petitioners' reply brief, p. 6)
Petitioners: No. The layering that might be induced by chloroform could be avoided by mixing the sample just prior to splitting. Moreover, the need to preserve the sample arose because of ESE's excessive delay. Also, ESE's alleged method does not provide for the use of chloroform. Also, the lab notes say nothing about the need to shortcut making parallel extractions. (Memorandum in response to EPA memorandum, p. 4)
25
As EPA noted in 43 Fed.Reg. 17776, 17781 (1978):
"The analytical procedures utilized by each manufacturer were solicited by EPA and evaluated by the Environmental Monitoring and Support Laboratory in Cincinnati. The data utilized in establishing these limitations were derived from analytical methods which, in the opinion of the Cincinnati Laboratory, 'appear capable of measuring the compound with adequate sensitivity.' "
26
References to the confidential portion of the appendix will be to "C.App."
27
By the same token, petitioners' broadbased attack on EPA's use of data in literature must be rejected out of hand. Certainly the literature data are not as valuable as operating plant data would be, but the plants have not supplied enough information, and the literature is useful for what it does say. For instance, if the literature identifies a particular pesticide as amenable to treatment by adsorption or hydrolysis under laboratory conditions, that does not guarantee the same results under industrial conditions, but neither does that mean the information should be ignored. It means that, other things being equal, the pesticide can be treated. It is then up to the Agency experts to decide whether relaxing the laboratory conditions would so change the result that the pesticide could not be treated by industry. Merely attacking the literature because it is experimental is no help to petitioners' cause unless they can also show that the particular conclusions drawn from the literature are unreasonable. We have found nothing in the Act to outlaw scientific deductive reasoning
28
EPA took account of the limited data at some plants by using a weighted average that gave relatively less weight to facilities from which it had fewer observations in the calculations of the final effluent limitations
29
This confusion cannot impugn the conclusion that Olin's carbon adsorption system effectively treats the waste streams that in fact pass through it
30
The brief-writers compound the inaccuracy (and diminish our trust in them) by arguing that the 1.3 pound figure must be disbelieved because it disagrees with data submitted by Olin on September 14, 1977. C.App. 353. That data only concerned the influent and effluent of the carbon adsorption system. The 1.3 pound figure related to waste not passing through the system
31
Petitioners also object to use of data from Hercules to calculate the effluent limits. Hercules uses neither hydrolysis nor carbon adsorption to treat its waste water. It achieves excellent results with a physical-chemical system relying on equalization ponds, gravity separation, and neutralization. Though it does not support the proposition that hydrolysis and carbon adsorption are common industry techniques, it is evidence of the levels to which pesticides can be reduced by treatment. There is no reason to ignore these results simply because they are achieved more easily than by use of the recommended model technology
32
The statistical methodology used in the interim regulations was fully disclosed and was the subject of extensive comment. In response to those comments EPA revised its methodology
33
The industry failed to supply data on some operating systems
34
By a combination of these sources and extensions of information, EPA explicitly reached conclusions as to all but 10 of the 49 pesticides. App. 111, 113, 118-119, 126, 128-131, 132, and 138. The ten of which we find no mention are BHC, Dichloran, Mirex, Barban, Fenuron, Fenuron TCA, Swep, Dicamba, Silvex, and Perthane. We are willing to assume from EPA's general language that it reached similar conclusions as to these ten pesticides as well
35
There is every indication that EPA was fully aware of the various factors that, as petitioners point out, can affect the relative amenability to treatment of different pesticides. The development document mentions them. See, e. g., App. 104, 110, 120. We will not assume that the Agency failed to take account of such factors when it evaluated the possibility of extending the recommended treatment techniques to other chemicals
36
We are not convinced that the duty to "include consideration of cost in relation to benefit" imposed on EPA by this clause of § 1314(b)(1)(B) is significantly different from the duty imposed by the same subsection to "take into account" certain other factors. But see Weyerhaeuser, at 1045-1046. We see no more reason for us to substitute our judgment for the EPA's concerning costs and benefits, assuming that the Agency has "informed itself as to their magnitude, and reached its own express and considered (opinion)", See id., than concerning the other enumerated factors
37
We agree with the Weyerhaeuser court that "when an incremental analysis has been performed by industry and submitted to EPA, it is worthy of scrutiny by the Agency." At 1048. duPont's study, indicating rapidly increasing costs for removal of incremental amounts of pollutants, certainly was "worthy of scrutiny", and we assume that EPA did not ignore it. Largely through no fault of duPont's, however, the study tested a carbon adsorption model very different from the one that formed the basis for EPA's cost estimates. Most notably, duPont studied contact times of 22, 44, and 66 minutes whereas EPA prepared cost estimates for systems with contact times of 60, 300, 600, and 750 minutes. Generally the longer the effluent remains in contact with the carbon, the more efficient the treatment will be. We are not prepared to say that the duPont study demonstrates that incremental costs of EPA's model system were wholly out of proportion to incremental benefits, nor will we require EPA explicitly to respond to every study submitted by commenters
38
EPA lacked information as to two others. The Agency, in a permissible exercise of discretion, did not consider costs already incurred in complying with NPDES discharge permits. Weyerhaeuser, at 1049
39
" 'Metallo-organic active ingredients' means carbon containing active ingredients containing one or more metallic atoms in the structure." 40 C.F.R. § 455.31(a)
40
This study apparently formed the basis for a 1975 EPA report which, however, made a most critical error in transcription. It said, "Diamond Shamrock's plant is a 'low effluent' plant, although aqueous waste is Not discharged. . . . (T)he discharge of arsenic averages about 0.7 to 0.8 (parts per million). The total amount of arsenic discharged amounts to only about 1/2 lb/day." (Emphasis added.) The internal inconsistency is obvious
41
Diamond Shamrock's comments on the interim development document expressed concern about the zero discharge limit, but on the ground that there is a higher permissible level for arsenic in public water supplies
42
One of the other arsenic producers, Ansul, has apparently ceased production. Its performance while in operation, however, is relevant in determining achievable discharge limitations
43
The Development Document reports as follows:
"No cost estimates have been developed for this subcategory. The state-of-the-art at plants manufacturing metallo-organic pesticide chemicals is no discharge of process waste water pollutants. It was originally reported that all plants were no 'discharge' facilities, however, representatives of one facility (plant 19) recently indicated that there is a discharge from their manufacture of metallic-organo pesticide chemicals. This is being investigated by the Agency. The overall impact to this subcategory is expected to be minimal." App. 166.
EPA now advises us that there is not any on-going investigation.
44
EPA also relied on an "Economic Analysis of Effluent Limitations Guidelines for the Pesticide Chemicals Manufacturing Point Source Category", a 1975 report entitled "Pollution Control Technology for Pesticide Formulators and Packagers" together with the telephone survey on which it was in part based, and a study of one company with 38 facilities. There is no suggestion that these studies conflict with the two we will discuss; rather, NACA argues that they are unreliable, irrelevant, or not applicable to all companies
45
The exact number of firms contacted is not clear from the record before us which reveals only the firms which responded to the survey. It may be that this distinction between contacts and responses accounts for the confusion reported in note 46, Infra. NACA has not challenged, and indeed has relied upon, the random nature of this survey
46
EPA has reported the number surveyed to be as high as 100. NACA suggests the number of relevant responses may be as low as 40. No matter how NACA shuffles the data, however, the basic conclusion on which we rely comes forward. The great majority of formulating companies do not discharge any process waste water pollutants into navigable waters
47
If, as NACA asserts, future regulations outlaw these indirect discharges, NACA may challenge those regulations. We cannot overturn regulations because companies able to comply with them might be unable to comply with supposed future rules
48
NACA notes that this conclusion is tempered by the word "appears" and by the qualification that air pollution problems that may be connected with evaporation should be studied
49
For four of the companies no process is indicated. We shall assume that the one of these which did discharge waste water used a water-based process and that the other three used dry-based processes. This puts the uncertain data in the light most favorable to NACA
50
This is true even if NACA's figure for the cost of contract hauling is substituted for EPA's. EPA assumed hauling would cost $5 per gallon and that hauling all waste water would, therefore, cost about $4600 per year for a medium size plant, about half the $9100 annual operating cost of an evaporation system. Using the $8.50 per gallon cost suggested by NACA, the annual cost for the same plant would go up to about $7800, still significantly less than the cost of the evaporation system
51
Again, even if EPA used the wrong price for contract hauling, See note 50, Supra, its analysis would not be significantly in error. Operating maintenance costs comprise a very small percentage of the total annual operating costs, and, we assume, hauling costs are less than all the operating costs. Even if All the operating costs were for hauling, the $8.50 price would increase total operating cost by only $700 for the medium plant, raising the total annual cost to about $9800, an increase of only about 8% Which would in turn increase the estimated cost per gallon at the medium plant from $0.073 per gallon to $0.079 per gallon
52
Weston did compile some information on the basis of literature, company data, and plant visits. App. 1711
53
We need not concern ourselves at this time with the additional economic cost, if any, to the pesticide industry of future compliance with these regulations. EPA can more properly consider such costs in proceedings concerning those regulations. Any attempt to assess the costs of compliance with unpromulgated regulations would be premature and highly speculative. We know of no law that prohibits an agency from attacking the evils within its jurisdiction in a piece-meal fashion. A contrary rule would make the regulatory process unworkable
54
We do not reach any issues raised exclusively by Mobay Chemical Corp. in Nos. 77-1081 and 78-1223. Action on those petitions is being withheld so that counsel for Mobay and EPA may pursue efforts to settle their disputes | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/371796/ | 609 F.2d 793
Odel COMEAUX, Plaintiff-Appellee,v.SOUTHERN PACIFIC TRANSPORTATION CO., Defendant-Third PartyPlaintiff-Appellant,Elmo Laborde, M. D., Third Party Defendant-Appellee.
No. 77-2906.
United States Court of Appeals,Fifth Circuit.
Jan. 10, 1980.
Harry McCall, Jr., New Orleans, La., for defendant-third party plaintiff-appellant.
H. Martin Hunley, Jr., David S. Kelly, Henry B. Alsobrook, Jr., New Orleans, La., J. Weldon Granger, Bellaire, Tex., Michael D. Cucullu, New Orleans, La., for Laborde.
Appeal from the United States District Court for the Eastern District of Louisiana.
Before GODBOLD, HILL and POLITZ, Circuit Judges.
JAMES C. HILL, Circuit Judge:
1
Appellee Odel Comeaux sustained an injury to his left arm when he was forced to jump from a railroad car on which he was working. Comeaux was taken to a hospital and was treated by Dr. Elmo J. Laborde who diagnosed the injury as a fracture of the ulna radial head and a dislocation of the left elbow. The dislocation was reduced and a cast applied to the arm. A few days later surgery was performed to remove bone chips. Sometime in the next few months the elbow redislocated. The redislocation was never detected by Laborde. By the time the problem was discovered by another physician, it was too late to remedy. As a result, Comeaux's elbow had to be fused into position.
2
Comeaux filed suit in federal court against his employer, Southern Pacific, under the Federal Employers' Liability Act, 45 U.S.C. § 51 et seq. Prior to trial, Southern Pacific filed a third-party complaint against Dr. Laborde, seeking indemnification or contribution. During the trial, the district court, on motion of Dr. Laborde, dismissed the third-party complaint on the grounds that, under Louisiana law, Southern Pacific had no right to either indemnification or contribution from Dr. Laborde. The case against Southern Pacific was submitted to the jury on special interrogatories. A verdict was rendered in favor of Comeaux and damages assessed in the amount of $275,000.
3
Southern Pacific now complains that it was held liable for damages attributable to the alleged negligence of Dr. Laborde, and that the district court should not have dismissed the third-party complaint. We affirm.
4
With respect to Southern Pacific's first argument, we are directed to an interrogatory in which the jury was asked to decide "(w)hat amount . . . will fairly and adequately compensate the plaintiff for the injuries sustained by him which were proximately caused by the negligence of the defendant, Southern Pacific Transportation Company." Record, App. Vol. 1-2, at 557. At the trial, counsel for Southern Pacific requested and was refused an additional interrogatory asking the jury to determine the amount of damage proximately caused by Dr. Laborde's treatment. Southern Pacific feels that the trial judge failed to make it clear to the jury that they were not to award damages against Southern Pacific for any aggravation of Comeaux's injury caused by Dr. Laborde. A review of the instructions given in connection with the interrogatory convinces us that this argument is without merit. In a very detailed and clear manner, the court explained to the jury that Southern Pacific was not to be held responsible for the redislocation of Comeaux's elbow if it found that the redislocation resulted from Dr. Laborde's failure to exercise the skill ordinarily employed by members of the profession in good standing in his community.1 In light of the unambiguous instructions given the jury, an additional interrogatory simply was unnecessary.2 We also take this opportunity to point out that Southern Pacific probably got a more favorable instruction than it was entitled to, since the general rule is that the original tortfeasor is responsible for any added injury caused by the malpractice of a treating physician. W. Prosser, Law of Torts § 44, at 278-79 (4th ed. 1971). Because Comeaux appears content with his verdict and has not raised any objection to the instructions, it is unnecessary for us to give the question further attention.
5
Our conclusion that no part of the $275,000 could have represented damages attributable to Dr. Laborde's treatment renders moot the question whether Southern Pacific's third-party complaint property was dismissed. Since Southern Pacific was held responsible only for its own negligence, it has no claim to pursue against Dr. Laborde for indemnification or contribution.
6
AFFIRMED.
1
The district court instructed the jury as follows:
Now, you are not to award damages for any injury or condition from which the plaintiff may have suffered or may be suffering unless it has been established by a preponderance of the evidence in the case that such injury or condition was proximately caused by the accident in question.
Injury or damage is proximately caused by an accident if it is either directly resulting from or is a reasonably probable consequence of the accident.
If you reach the question of damages, you will bear in mind that the plaintiff, of course, contends that all of the damages for which he seeks to recover are proximately caused by the negligence of the railroad, and his accident and injury caused thereby. On the other hand, the defendant contends that either the plaintiff himself dislocated his elbow or it slipped out of its reduced position while in its plaster cast or during the time that plaintiff was undergoing physical therapy, and Dr. Laborde's failure to x-ray the elbow properly and take corrective action was an intervening, superceding cause of the injury for which Southern Pacific cannot be held liable, and if Southern Pacific is held liable for plaintiff's accident and injury, any award of damages to the plaintiff should be limited to the normal period of recovery, estimated at about six months to one year and should not include damages for further complications and treatment of the elbow resulting from Dr. Laborde's failure to properly recognize and treat the redislocation of the plaintiff's elbow.
Now, should you find that the defendant railroad was negligent and that its negligence was a cause of the plaintiff's accident, in your determination of the damages which you should award the plaintiff, you will then consider the railroad's contention that it is not liable for any damages not proximately resulting from the original injury and first dislocation of the elbow, specifically that it is not liable for any additional damage, loss, injury or disability, if any, which may have resulted from the second dislocation which the railroad contends was not caused by its negligence or that of its employees, but rather by the negligence of Dr. Laborde in his treatment and care of the plaintiff following the operation of February 28, 1974.
The law recognizes that however remarkable the advances made by medical science there remains much to be learned. Members of the medical profession cannot be held responsible for circumstances beyond their knowledge and ability as humans to anticipate and prevent.
Accordingly, the law wisely requires only that they possess and use that degree of knowledge, ability and skill as is possessed and used by their colleagues. The result is, therefore, that it is a doctor's duty to exercise the degree of skill ordinarily employed under similar circumstances by members of his profession, in good standing, in the same community or locality, and to use reasonable care and diligence along with his best judgment in the application of the skill to the case.
Because of that rule, the standard by which you determine negligence with regard to a doctor is different from the standards of negligence applicable to an ordinary person.
The law of Louisiana does not require a physician to exercise the highest degree of care or skill possible in treating a patient, nor does it impute negligence to the physician who fails to follow that course of treatment which at a later date may be proved to be the wiser course.
Whether he has complied with that degree of care required in treating a patient is measured by the skill ordinarily employed by members of his profession, in good standing, in his community in treating the same complaint or injury.
Thus, if you should find from a preponderance of the evidence that in treating and caring for the plaintiff after he performed the February 28, 1974 operation Dr. Laborde failed to follow or deviated from such standard of care as you may find it to have been proven by a preponderance of the evidence, then you would find that Dr. Laborde acted negligently in such treatment and care given the plaintiff after such operation, but this would not authorize you to withhold recovery from the plaintiff against the railroad for any additional damages as you may find was suffered by the plaintiff after the second dislocation, unless it also appears from a preponderance of the evidence that such damages were the proximate result of such negligence on the part of Dr. Laborde rather than the proximate result of the original accident and injury.
On the other hand, if you should find from a preponderance of the evidence that the standard of care prevalent at the time in Lafayette was not established, or if you find that it was established that Dr. Laborde treated the plaintiff in accordance with such standard of care, then you would not find Dr. Laborde negligent and you would allow recovery by plaintiff against the defendant railroad for such damages as you may find were proximately caused by the negligence of the defendant railroad, including those arising from the original as well as the second dislocation.
A doctor who exercises skill and care required in treating and caring for a patient, as measured by the skill ordinarily employed by members of his profession in good standing in the community in which he practices, cannot be found negligent because unfavorable or unsuccessful results may follow the exercise by him of reasonable care and skill and judgment in his treatment of the patient.
Record, App. Vol. 2-2, at 1082-86.
2
We note also that in his closing argument counsel for Southern spent a good deal of time explaining to the jury that Southern Pacific was to be held liable only for its own negligence and not that of Dr. Laborde. Record, App. Vol. 2-2, at 1044-52. No objection to these comments was made by Comeaux's attorney | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/371805/ | 609 F.2d 829
YEARGIN CONSTRUCTION COMPANY, INC., Plaintiff-Appellee,v.PARSONS & WHITTEMORE ALABAMA MACHINERY & SERVICES CORP. andParsons& Whittemore, Inc., Defendants-Appellants.
No. 78-3348.
United States Court of Appeals,Fifth Circuit.
Jan. 14, 1980.
James E. Clark, Birmingham, Ala., for defendants-appellants.
M. R. Nachman, Jr., Joel E. Dillard, Montgomery, Ala., Haynsworth, Perry, Bryant, Marion & Johnstone, Joseph J. Blake, Jr., Greenville, S. C., for plaintiff-appellee.
Appeal from the United States District Court for the Middle District of Alabama.
Before COLEMAN, Chief Judge, RONEY and FAY, Circuit Judges.
PER CURIAM:
1
Parsons & Whittemore Alabama Machinery & Services Corp. (Parsons) contracted for construction by Yeargin Construction Co. (Yeargin) of a pulp mill in Claiborne, Alabama. Work was begun in 1977 and continued until October 6, 1978, when Parsons terminated Yeargin's services and ordered it off the job because of a dispute as to the timeliness and quality of construction. Yeargin sued Parsons in the district court on October 9, 1978, alleging breach of contract, false and fraudulent inducement to enter into the contract, and conversion of tools, equipment and records. Parsons contended the issues should be arbitrated.
2
The day after the complaint was filed the court ordered that Parsons show cause why an order requiring the release of Yeargin's property should not issue. After a hearing on October 20, the court entered its order of October 24 (1) denying Parsons' motion to dismiss for improper venue; (2) denying Parsons' motion for a stay of court proceedings pending resolution of issues through arbitration; and (3) ordering Parsons to release to Yeargin the records held by Parsons at the construction site. The parties had settled the issue of possession of tools and equipment.
3
Parsons promptly filed notice of appeal from the October 24 order. Although Parsons attempts to argue issues raised by a subsequent order of the district court, only the October 24 order is subject to review on this appeal. A stay of that order was granted by a single judge of this Court on October 27, but stay pending appeal was denied by a panel of the Court on November 15, 1978.
4
Although Parsons argues to the contrary, very little remains in this appeal. First, the denial of the motion to dismiss for improper venue is not contested by Parsons on appeal.
5
Second, the appeal from the district court's denial of a stay pending arbitration is now moot. See International Society for Krishna Consciousness of Atlanta v. Eaves, 601 F.2d 809, 815-16 (5th Cir. 1979). On February 6, 1979, the district court granted a stay pending arbitration, retaining supervision over discovery proceedings until arbitration had begun. That order was not appealed. Furthermore, after appointment the arbitration panel assumed control over discovery, and an arbitration award was entered after oral argument of this appeal. Parsons' contention that the district court should relinquish control of the case for arbitration is thus no longer at issue. See Kremens v. Bartley, 431 U.S. 119, 128-29, 97 S.Ct. 1709, 52 L.Ed.2d 184 (1977). The problem of dual discovery in the district court and the arbitration proceeding, addressed by Mississippi Power Co. v. Peabody Coal Co., 69 F.R.D. 558 (S.D.Miss.1976), and strenuously argued by Parsons, is of no concern here. That issue is not raised by the appeal of the October 24 order. Moreover, this procedural situation does not present the issue because discovery in the two proceedings was not simultaneous. See Heat and Frost Insulators, Local 666 v. Leona Lee Corp., 434 F.2d 192 (5th Cir. 1970).
6
Third, notwithstanding Yeargin's arguments to the contrary, the portion of the October 24 order requiring the turnover of records is probably appealable under 28 U.S.C.A. § 1292(a)(1), which grants this Court jurisdiction of appeals from "(i)nterlocutory orders . . . granting . . . injunctions. . . . " See Laje v. R. E. Thomason General Hospital, 564 F.2d 1159 (5th Cir. 1977), Cert. denied, 437 U.S. 905, 98 S.Ct. 3091, 57 L.Ed.2d 1134 (1978); McCoy v. Louisiana State Board of Education, 345 F.2d 720 (5th Cir. 1965). The court ordered
7
that Defendants turn over to the Plaintiff all records, plans and other documents held by them. . . .
8
The purpose of the order was to restore the status quo pending determination of the parties' rights. See Morgan v. Fletcher, 518 F.2d 236, 239 (5th Cir. 1975); American Radio Association v. Mobile Steamship Association, 483 F.2d 1, 4 (5th Cir. 1973). The district court, in effect, ordered the return of the disputed records to the party which had possession of them at the outset of the controversy. Cf. Washington Capitols Basketball Club, Inc. v. Barry, 419 F.2d 472, 476 (9th Cir. 1969) (status quo is last uncontested status of parties).
9
On the record before it, the court's exercise of equitable power to preserve the status quo pending determination of the merits was well within the broad discretion given to district courts in these matters. The plaintiff was in possession of the records, plans and documents before they were forced to leave the jobsite without them. There was a reasonable showing that ultimately a decision would be made that such materials had become plaintiff's property. The records would be important evidence in the controversy ahead, and the court could well determine they should be protected from defendants.
10
More importantly, it is clear that the district court's order was only a temporary measure to maintain the status quo pending litigation. The order has been complied with. As far as can be ascertained from the record before us, the issue of the ultimate disposition of the records has been neither presented to nor ruled on by the district court. If that issue is not now meaningless to the parties, and was not resolved in the arbitration proceeding, there appears to be no reason why it cannot be litigated in the district court. Certainly the record before this Court is insufficient to enable a decision as to the true ownership of the disputed records.
11
Any portion of the October 24, 1978 order here appealed that is not moot is
12
AFFIRMED. | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1543761/ | 11 F.2d 802 (1926)
NEW YORK-BROOKLYN FUEL CORPORATION
v.
FULLER.
No. 268.
Circuit Court of Appeals, Second Circuit.
March 26, 1926.
*803 Charles Foster Brown, of New York City, for petitioner appellant.
Nathan Bardach, of New York City, for respondent appellee.
Before ROGERS, HOUGH, and MANTON, Circuit Judges.
MANTON, Circuit Judge.
On May 7, 1925, the New York-Brooklyn Fuel Corporation was adjudged a bankrupt on a petition filed April 21, 1925. Prior thereto, and within four months, the Berkshire Iron Works, Inc., had performed labor and supplied materials on its property situate in the borough of Brooklyn, city of New York, at an agreed price. On May 8th it filed its mechanic's lien under the provisions of section 13 of the New York State Lien Law (Consol. Laws, c. 33). The referee held the lien to be ineffectual for the reason that it was subsequent to the adjudication in bankruptcy. This ruling was reversed by the District Judge. The notice of lien was sufficient in description and statement. On July 16, 1925, the real property on which the work was performed and material furnished was sold by order of the bankruptcy court free and clear of this lien, under an agreement that the proceeds derived should stand in place of the real property and that the lienor should thereafter prove its claim, if it had one, against the proceeds.
A trustee in bankruptcy is in the position of the bankrupt just before adjudication. York Mfg. Co. v. Cassell, 26 S. Ct. 481, 201 U.S. 344, 50 L. Ed. 782. It has been held that he may not contest a mechanic's lien, even if filed subsequent to the adjudication. In re Grissler, 136 F. 754, 69 Cow. C. A. 406. But it is argued that the amendment of 1910 (section 47a of the Bankruptcy Act [Comp. St. § 9631]) has placed the trustee in a better position because it provides:
"* * * And such trustees, as to all property in the custody or coming into the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies and powers of a creditor holding a lien by legal or equitable proceedings thereon, and also, as to all property not in the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a judgment creditor holding an execution duly returned unsatisfied. * * *"
Section 13 of the New York Lien Law provides that:
"A lien for materials furnished or labor performed in the improvement of real property shall have priority over a conveyance, judgment or other claim against such property not recorded, docketed or filed at the time of the filing of the notice of such lien, except as hereinafter in this article provided, * * * and also over an attachment hereafter issued or a money judgment hereafter recovered upon a claim, which, in whole or in part, was not for materials furnished, labor performed or moneys advanced for the improvement of such real property; and over *804 any claim or lien acquired in any proceedings upon such judgment. * * *"
It thus clearly appears that section 13 grants priority to a mechanic's lien over all judgment creditors excepting those whose judgments were obtained or claimed for materials furnished, labor performed, or moneys advanced for the improvement of real property. It is, however, argued that this is a limitation based upon the nature of the creditors' original claim, and differs from the limitation imposed upon the rights given a trustee by the section of the Bankruptcy Act, where a trustee is deemed vested with the right of any creditor holding a lien by legal or equitable proceedings. But the trustee is not a creditor. He merely represents the creditors, and by virtue of the Bankruptcy Act is vested with whatever rights any or all of them might have had as against the petition in bankruptcy. In re Duker Ave. Meat Market Co. (C. C. A.) 2 F.(2d) 699. A mechanic's lien is not one obtained through legal proceedings. It is created by statute. It is not lost by adjudication in bankruptcy, even though the lien did not attach until notice. It is not dissolved by adjudication in bankruptcy within the four months after it is acquired. It is valid, save only where it may be attacked for an intent to hinder, delay, or defraud, which is unlikely in a lien of this class.
The state courts of New York, construing this lien, have held that, even if filed after adjudication in bankruptcy, but within the time required by the Lien Law, it takes precedence over the interest of the trustee in bankruptcy in the amount due upon the contract, notwithstanding the amendment of 1910, section 47a of the Bankruptcy Act. Gates & Co. v. John F. Stevens Construction Co., 115 N.E. 22, 220 N.Y. 38; Gates & Co. v. Natl. Fair & Exposition Asso., 121 N.E. 741, 225 N.Y. 142; Hildreth Granite Co. v. Watervliet, 146 N. Y. S. 449, 161 A.D. 420; Kane Co. v. Kinney, 66 N.E. 619, 174 N.Y. 69. In matters of lien law, the local law, established by decisions of the courts of last resort of the state, shall have a controlling influence on the federal courts, and if a local law is expressed in sufficient clearness, the national courts will accept it, rather than form their own judgment. In re Seward Dredging Co., 242 F. 225, 155 Cow. C. A. 65; Kemp Lumber Co. v. Howard, 237 F. 574, 150 Cow. C. A. 456.
The effect of the amendment of 1910 of the Bankruptcy Act was to make clear that, as respects property in the custody of the bankruptcy court, the trustee shall be considered to have the same title that a creditor holding an execution or other lien by legal or equitable proceedings levied upon that property would have under the state law, but as to property not so in the custody of the bankruptcy court the trustee shall stand in the position of a judgment creditor holding an execution returned unsatisfied. And this entitles the trustee to proceed as an individual creditor might have done to save assets. Thus, in effect, proceedings in bankruptcy will give to creditors the same rights that creditors under the state law would have had, if there had been no bankruptcy, and from which they are debarred by bankruptcy. This is desirable for all parties.
Congress did not intend to create or to disturb such rights as a state gives to its citizens for the protection of their property and the enforcement of their rights. It did not intend to make an adjudication act as a lien superior to the state's mechanic's lien law. It has placed the trustee in a position to protect the rights and remedies of creditors. The purpose of collecting and reducing to money assets the property of the bankrupt cannot, in the absence of expressed declaration by Congress, mean an interference with this statute law of the state creating a lien. All property received by the trustee is so received and burdened with such obligations. Uniformity of application is to be found in the recognition of such a state lien law statute. Creditors dealing with the bankrupt are chargeable with knowledge of the rights accorded by such Lien Law.
The cases decided prior to 1910 by the highest court of the state of New York, and before the amendment of the present Lien Law of that state, are not helpful, because they were dealing with the construction of another statute. McCorkle v. Herrman, 22 N.E. 948, 117 N.Y. 297. The court below properly held that the trustee took the property subject to the lien given to the appellee, which was filed one day after the adjudication in bankruptcy, but within the period allowed by the same Lien Law.
Order affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543769/ | 55 B.R. 781 (1985)
In re James Ross HARTLEY, Individually and dba Hartley Trucking and Sharon L. Hartley, Debtors.
Quentin M. DERRYBERRY, II, Trustee, Plaintiff,
v.
The TOLEDO TRUST COMPANY, Successor-in-interest to The Peoples Bank, Carey, Ohio, Defendant.
Adv. No. 83-0750, Bankruptcy No. 81-01855.
United States Bankruptcy Court, N.D. Ohio, W.D.
December 5, 1985.
*782 Quentin M. Derryberry, II, Wapakoneta, Ohio, trustee/plaintiff.
Mark Kreitman, Mark E. Thomas, Chicago, Ill., for trustee.
Thomas Drake, William E. Clark, Findlay, Ohio, for Peoples Bank of McComb, Ohio.
Reginald Jackson, Steven Smith, Toledo, Ohio, for defendant Toledo Trust Co.
Theodore M. Rowen, Kenneth J. White, Toledo, Ohio, for St. Joseph Bank.
ORDER DIRECTING TRANSFER OF ADVERSARY PROCEEDING TO THE UNITED STATES DISTRICT COURT
WALTER J. KRASNIEWSKI, Bankruptcy Judge.
This matter is before the Court upon the motion of the defendant Toledo Trust Company for summary judgment to dismiss all five counts of the plaintiff/trustee, Quentin M. Derryberry, II's complaint and upon the Trustee's response thereto. The Court having carefully examined each count of the complaint and the motion for summary judgment finds that the allegations in the plaintiff's complaint require substantial and material consideration of non-code federal statutes that regulate organizations or activities affecting interstate commerce for the resolution of this case and pursuant to 28 U.S.C. § 157(d) withdrawal of this case to the District Court is mandatory.
FACTS
On September 8, 1981, James Ross Hartley, individually, and doing business as Hartley Trucking, and Sharon L. Hartley (collectively referred to as "Debtor") filed their voluntary petition for relief under Chapter 7 of the Bankruptcy Code.
On September 8, 1981, the Plaintiff, Quentin M. Derryberry II, was appointed Trustee of the Debtor's estate ("Trustee") pursuant to an order of th is Court.
The Peoples Bank, Carey, Ohio ("Carey Bank"), was a corporation existing and doing business under the laws of the state of Ohio and was a state bank insured by the Federal Deposit Insurance Corporation. The Defendant, Toledo Trust Company, is successor-in-interest to the Carey Bank by reason of a merger between the Toledo Trust Co. and Carey Bank occurring in April of 1982.
Hartley Trucking was a sole proprietorship owned by James Ross Hartley. Commencing about 1975 to about August, 1981, Hartley Trucking engaged in interstate hauling of freight. Its main trucking terminal was located in Carey, Ohio.
From about 1977 through December, 1980, the Debtor maintained checking accounts at the Carey Bank. He also had accounts at the St. Joseph Bank and Trust Company, South Bend, Indiana and the People's Bank of McComb, Ohio.
Calvin Thome ("Thome") was President of the Carey Bank until mid-1977. Subsequently, Thome became an employee of the Debtor. On or about October 1, 1980, Thome resumed his duties as President of the Carey Bank.
Commencing on or about June, 1980, until the Carey Bank account was closed in December, 1980, the Debtor's monthly account statement consistently reflected substantial overdrafts. The Plaintiff alleges the Debtor used the following procedure to cover the overdrafts. In the morning the *783 Debtor or his agent would telephone the Carey Bank, usually Thome, to ascertain the overdraft amount in the account as of the close of business on the previous day. The Debtor or his agent then would authorize the Carey Bank, usually Thome, to make deposits into the account in an amount slightly in excess of the overdraft, or the Debtor or his agent would make deposits into the account in an amount slightly in excess of the overdraft. The deposits were in the form of: (a) checks drawn on other banks where the Debtor maintained accounts; (b) wire transfers from such other accounts; (c) checks the Debtor received from employees or other business associates; or (d) loans and advances from the Carey Bank. The Carey Bank then placed the deposits from other banks through the normal collection process.
The Debtor had overdrafts at other banks which it attempted to appear to cover by drawing funds on the Carey Bank and on other banks. Thus, during the course of the day, checks payable to or for the benefit of the Debtor, and drawn on the Carey Bank for deposit in other banks, were presented to the Carey Bank for collection. These checks would then in turn create another, or increase the existing, overdraft at the Carey Bank.
DISCUSSION
The Plaintiff has filed a five count complaint against Toledo Trust. The first count alleges fraudulent transfers were made by the Debtor to the Carey Bank and that they should be avoidable pursuant to 11 U.S.C. § 548. The Plaintiff claims that the Bank aided the Debtor in a check kiting scheme by accepting uncollected funds as payment to cover overdrafts; that the checks deposited were drawn against insufficient or uncollected funds at another bank where the Debtor maintained accounts, and that these transactions resulted in a cycle of overdrafts, or kite. When the cycle collapsed, the Debtor's checks were not honored and the Debtor's innocent creditors were defrauded.
Count two of the Plaintiff's complaint asserts the right to avoid any transfer of an interest in the Debtor's property or any obligation incurred by the Debtor that is voidable under applicable law pursuant to 11 U.S.C. § 544(b). The Plaintiff relies on O.R.C. § 1336.01 through .12 which states that every conveyance of the Debtor's property made with actual intent to hinder, delay, or defraud existing or future creditors is a fraudulent transfer. All of the transfers between the Carey Bank and the Debtor made via the mail, wire transfer or any other method used to cover the overdrafts described in count one are being attacked as fraudulent.
The third count realleges the aforementioned check kiting scheme and seeks to avoid those transactions as preferential transfers to an insider pursuant to 11 U.S.C. § 547.
Count Four repeats the check kiting allegations and accuses the Debtor, the Carey Bank, St. Joseph's Bank and the McComb Bank of acting together for the unlawful purpose of engaging in a check kiting scheme, engaging in fraudulent transfers of assets and concealing and obscuring the Debtor's insolvent financial condition from the Debtor's creditors and suppliers. Those alleged facts according to the Plaintiff constitutes a conspiracy which caused creditors to suffer damages in excess of 6.5 million dollars.
Finally, Count five alleges that the Carey Bank and the Debtor used the United States mails and interstate wires in furtherance of the check kiting scheme. Such conduct according to the Plaintiff constitutes a scheme or artifice to defraud in violation of 18 U.S.C. §§ 1341 and 1343. Furthermore, that the above-described use of the mails and wires by the Debtor and Carey Bank, constitutes a "pattern of racketeering activity" pursuant to 18 U.S.C. §§ 1341, 1343, 1961(1) and (5). By reason of the previously alleged acts the Plaintiff asserts that the Carey Bank violated 18 U.S.C. § 1962(c) by participating in, directly and indirectly, and aiding the conduct of the Debtor's affairs through a pattern of *784 racketeering activity. Also that the Carey Bank knew the Debtor was engaged in a check kiting scheme and performed overt acts in furtherance of the Debtor's check kiting scheme, in violation of 18 U.S.C. § 1962(d). Furthermore, that the Carey Bank, as an enterprise engaged in activities which affect interstate commerce, used income derived from the above described pattern of racketeering activity in the operation of the Carey Bank, in violation of 18 U.S.C. § 1962(a).
The questions posed by this case concerning jurisdiction are novel and complex. Although part of the first three counts concern traditional bankruptcy questions there is also a part which is inextricably linked to each count that requires substantial and material consideration of non-code federal statutes for their resolution. The Trustee's allegation that the Defendant violated the Racketeer Influenced and Corrupt Organization Act ("RICO") makes it a necessity that the Court determine whether the Defendant's activities were those prohibited by 18 U.S.C. §§ 1961-1968. There is no question this case is the type provided for by the second sentence of § 157(d) which requires mandatory withdrawal by the District Court.
Section 157(d) of 28 U.S.C. provides as follows:
The District Court may withdraw, in whole or in part, any case or proceeding referred under this section, on its own motion or on timely motion of any party, for cause shown. The District Court shall, on timely motion of a party, so withdraw a proceeding if the Court determines that resolution of the proceeding requires consideration of both title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce.
This opinion is based upon the jurisdictional limitations of § 157 of the Bankruptcy Code. Section 157 was part of the Bankruptcy Amendments and Federal Judgeship Act of 1984, P.L. 98-353, 98 Stat. 333 (1984) (hereinafter "the Act") which was enacted on July 10, 1984. The Trustee's complaint was filed on September 3, 1983, however § 157 is applicable to this case by virtue of § 122 of the Act which states in pertinent part:
(a) Except as otherwise provided in this section, this title and the amendments made by this title shall take effect on the date of the enactment of this Act.
A review of the legislative history, specifically H.R. 5174, 38 Cong.Rec. 15 8897 (daily ed. June 29, 1984) reprinted in Collier on Bankruptcy, Appendix Vol. 3 at XX-79 (15th ed. 1985) shows that § 122 was intended to implement the jurisdictional aspects of the Act upon the date of enactment and that it does apply to all cases then pending. Indeed the jurisdictional portions of the Act had to become effective on that date, inasmuch as all prior legislative authorization for the Bankruptcy Courts had expired. In re Bell & Beckwith, 13 B.C.D. 151, 152, 50 B.R. 437 (Bankr.N.D.Ohio 1985). Therefore, based upon the clear meaning of § 122 and the legislative history the Court finds § 157 must be applied to this case.
The purpose of § 157 according to 1 Collier on Bankruptcy para. 3.01 at 3.41 (15th ed. 1985) is as follows: "Congress' intent can only be conjecture, but perhaps Congress had in mind that District Judges, which consider such matters on a daily basis, are better equipped to determine them than are Bankruptcy Judges." That explanation appears sound to this Court.
In light of § 157(c)(1) which permits Bankruptcy Judges to hear a non-core proceeding and submit proposed findings of fact and conclusions of law to the District Court the question arises as to whether that procedure can be followed with regard to non-code Federal laws. Collier answers as follows:
This procedure probably cannot be used with respect to proceedings which require consideration of both Title 11 and laws regulating organizations or activities affecting interstate commerce; first because Section 157(d) pertains to both core proceedings and non-core proceedings, *785 while Section 157(c)(1) applies only to non-core proceedings, so there is no direct authority for the procedures contained in § 157(c)(1) to be applied to core proceedings, and secondly because the mandatory withdrawal provision of Section 157(d) is quite specific, admitting of no exceptions, and if Congress had intended that the bankruptcy Judge be employed to make proposed findings and conclusions in such matters, Congress would assuredly have said so.
1 Collier on Bankruptcy para. 3.01 at 3-42, (15th ed. 1985.) Judge Nicholas J. Walinski in Michigan Milk Producers Association v. Hunter, 46 B.R. 214, 216 (N.D. Ohio 1985) found that "[n]otwithstanding the fact that the Trustee raised the federal antitrust counterclaim among various defenses and five other counterclaims which do not involve non-bankruptcy federal statutes, resolution of these proceedings will require substantial and material consideration of federal antitrust claim" and accordingly "withdrawal of reference is, therefore, mandatory under 28 U.S.C. § 157(d)." Therefore in the case sub judice as in Michigan Milk Producers the mere fact that traditional bankruptcy issues are raised with non-code federal statutes does not permit the bankruptcy court to take jurisdiction in light of § 157(d).
Drawing from the legislative history of § 157(d) the reported cases construing it find that it must be given a narrow application. The Court in In re White Motor Corporation, 12 B.C.D. 235, 242, 42 B.R. 693 (N.D.Ohio 1984) held that "Section 157(d) must therefore be read to require withdrawal not simply whenever non-code federal statutes will be considered but rather only when such consideration is necessary for the resolution of a case or proceeding." The standard for withdrawal determined in In re White Motor, supra at 243, 42 B.R. 693 is that "§ 157(d) in particular must be read to require withdrawal of the proceedings from the Bankruptcy Court only if this Court can make an affirmative determination that resolution of the claims will require substantial and material consideration of those non-code statutes." See also Michigan Milk Producers, supra. Accordingly, the Court finds that the record of this case supports an affirmative determination that resolution of the instant adversary proceeding would require substantial and material consideration of both Title 11 and non-bankruptcy federal statutes regulating organizations or activities affecting interstate commerce therefore making withdrawal of reference mandatory under 28 U.S.C. § 157(d).
The novel issue in this case is who may bring the motion to withdraw. To date all of the cases in which a § 157(d) motion to withdraw reference has been made were initiated by the plaintiff or defendant. The code states the District Court will consider withdrawal "on timely motion of a party." This Court does not believe that language excludes the Bankruptcy Court from making the motion for the following reasons.
First, it is clear that parties do not have the right to consent to the trial of non-code federal matters pursuant to § 157(c)(2). 1 Collier on Bankruptcy para. 3.01 at 3-43, (15th ed. 1985), declares that the parties cannot consent because "withdrawal is, after all, mandatory, and again, the provisions of subsection (c)(2) refer back to (c)(1) which deals with non-core proceedings." The Court agrees with Collier and finds that the parties may not consent to confer jurisdiction to the Bankruptcy Court matters which are excluded by § 157(d).
Collier, supra, speculates that while the parties cannot consent to trial of § 157(d) matters they may be able to accomplish the same result by failing to make a timely motion to withdraw. Such failure according to Collier may constitute a valid waiver. The Court does not agree that the parties may waive the provisions of § 157(d) for to permit waiver would be to allow them to do indirectly what they most assuredly cannot do directly.
Judicial economy requires that a Bankruptcy Judge not be forced to hear a case for which the Court is denied jurisdiction by § 157(d). If the parties were allowed to *786 waive the provisions of § 157(d) the Bankruptcy Court would be obliged to hear the case yet the District Court could at any time on its own motion withdraw reference. Certainly Bankruptcy Judges are not expected to hold trials during which they must constantly wonder when and if the District Court will withdraw the case thus making all their time and effort count for nothing. This Court believes that if the parties consent, or waive the provisions of § 157(d) either knowingly or by ignorance of the law it is the duty of the Bankruptcy Judge to bring the matter to the District Court's attention to avoid costly delays and wasted efforts of the parties and the Bankruptcy Court.
Finally, the possibility of an inconsistent decision in this case with a pending related matter already before District Judge Nicholas J. Walinski makes it necessary for this Court to withdraw reference. In Quentin M. Derryberry, II, Trustee v. The Peoples Banking Company, Civil Case No. 85-7420, reference was withdrawn by District Court Judge Nicholas J. Walinski. That case involves the same plaintiff as the case sub judice and makes virtually all the same charges against the McComb Bank as are made in this case against Toledo Trust. A third adversary concerning the same alleged check kiting scheme was filed against the St. Joseph Bank and Trust Company of South Bend, Indiana. Thus there are three cases against banks alleging "RICO" violations filed by the same plaintiff arising out of the same series of transactions. To prevent forum shopping and more importantly to avoid inconsistent results the Court finds that withdrawal of reference is required by § 157(d) and the parties may not waive those provisions. Therefore, because it is necessary to consider the Trustee's "RICO" claims for complete resolution of the instant adversary action withdrawal of reference is mandatory under 28 U.S.C. § 157(d). Furthermore, in accordance with § 157(d), the notion of judicial economy and to prevent inconsistent decisions this Court finds that it has the right sua sponte to direct withdrawal of reference and transfer this proceeding to the United States District Court.
For the foregoing reasons, it is
ORDERED that this proceeding be, and it hereby is, transferred to the United States District Court. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543762/ | 55 B.R. 185 (1985)
In the Matter of OTIS & EDWARDS, P.C., f/k/a Otis, Peters, Becker & Pietsch, P.C., f/k/a Peter R. Barbara & Associates, P.C., f/k/a Barbara, Ruby, Domol, Bowerman, Miller and Aaron, P.C., Debtors.
Bankruptcy No. 82-03508-G.
United States Bankruptcy Court, E.D. Michigan, S.D.
November 18, 1985.
*186 Robert B. Webster, Hill, Lewis, Goodrich, Adams & Tait, Birmingham, Mich., Trustee.
Robert A.W. Strong, Hill, Lewis, Goodrich, Adams & Tait, Detroit, Mich., for trustee.
David S. Grossman, Washington, D.C., for U.S. Department of Justice.
MEMORANDUM AND ORDER DENYING TRUSTEE'S MOTION FOR A DETERMINATION OF FEDERAL TAX LIABILITY
RAY REYNOLDS GRAVES, Bankruptcy Judge.
The Court is presented with a motion filed by Robert B. Webster, Trustee, pursuant *187 to 11 U.S.C. § 505 for a determination of the federal tax liability of Otis & Edwards, P.C. (Debtor). Having reviewed and considered the exhibits and testimony produced from the August 14th and 15th hearings on the trustee's motion, the Court finds the motion must be DENIED.
The law firm of Otis & Edwards originated in 1970 as Barbara & Wisok, P.C. At that time, Peter R. Barbara (Barbara) was the majority shareholder owning 750 of the corporation's 1,000 shares, and the corporation's president and secretary treasurer. Norton Wisok owned the balance of 250 shares. Through the years the corporation's name changed several times[1] with Barbara remaining president of the corporation. In 1977 Barbara also became the sole shareholder and changed the name of the corporation to Peter R. Barbara & Associates, P.C. (Barbara & Associates).
Beginning in fiscal year 1970-1971,[2] numerous transactions between Barbara and the corporation were recorded on the corporation's ledger balance as "Loan Receivable Account-Peter R. Barbara." The proceeds of the "loans" were disbursed by a check from the corporation payable to Barbara. Except for fiscal year 1973-1974, the outstanding loan balance increased every year from fiscal year 1970 to 1981. The balance rose from $16,396.69 in 1970-1971 to $83,870.48 in fiscal year 1971-1972 and $92,462.83 in fiscal year 1972-1973. The balance decreased in fiscal year 1973-1974 to $66,846.33 and jumped dramatically to $295,658.91 in fiscal year 1974-1975, $552,232.75 in fiscal year 1975-1976. The upward spiral continued through the following years. The loan balance reached $705,869.26 in fiscal year 1976-1977, $991,022.89 in fiscal year 1977-1978, $1,168,433.17 in fiscal year 1978-1979 and $1,324,416.41 in 1979-1980. The upward spiral came to a halt in fiscal year 1980-1981 at $1,641,868.01 (Exhibit F). At the end of fiscal year 1980-1981 Barbara & Associates filed a corporate tax return indicating a tax liability of $684,017.00. The amount was never paid.
In a deposition taken on September 13, 1984[3] (Exhibit I) Barbara responded to questions directed to him by Robert S. Strong, attorney for the Trustee, regarding the transactions. Barbara stated the withdrawals were loans authorized by the the Board of Directors at duly convened meetings of the Board. Although he was the sole shareholder in 1979 and could not recall the names of the Board members, the dates the Board convened, or whether in 1978 a plan to repay the withdrawals existed, Barbara stated that the Board's approval of the withdrawals could be found in the minutes of the meetings. He testified that the withdrawals were evidenced by promissory notes issued periodically in favor of the corporation. He further testified that a blanket promissory note encompassing all previous and future withdrawals was executed in favor of the corporation.
Minutes of the Board's meeting authorizing the withdrawals were not produced in either the deposition or in the hearings before this Court. One promissory note, (Exhibit C), executed on April 1, 1972, two months after the close of the fiscal year, was produced. The Trustee maintains the note properly documents all withdrawals from the corporation to Barbara between 1970 and 1981. The note signed by Barbara in favor of Barbara & Wisok, P.C. promises to pay $104,962.83 plus interest at the rate of six percent (6%) per annum, beginning April 21, 1972. Barbara was to make weekly payments of $500.00; a portion of each payment was to be applied to the interest calculated on the outstanding balance as of the beginning of each month. Although the note did not provide for a *188 maturity date, it did contain language that the note "may be extended from time to time without affecting the liability of the maker."[4]
Through the years the corporation expanded. The corporation's practice grew to include bankruptcy, divorce, real estate, workers' compensation, employment discrimination, automobile negligence, product liability, medical malpractice, and personal injury law. In 1977 Barbara's annual salary exceeded $165,000.00. By 1980 his income surpassed $200,000.00 a year and he had acquired a substantial net worth. From 1970-1980 $1.1 million had been recorded as payments from Barbara to the corporation on the loan receivables. By 1978, however, Barbara's payments were made only by withdrawals from the corporation.
Troubles had begun to emerge. According to Barbara the corporation experienced cash flow problems in 1979. To address the problem the corporation began to transfer client trust funds to the general fund account to pay operating costs and expenses. About the same time the Attorney Grievance Commission for the State of Michigan began to investigate more than 85 complaints from clients of Barbara & Associates. Barbara was later charged by the Grievance Administrator with fifteen counts of failing to properly deliver to clients their share of settlement or judgment proceeds. The conduct was alleged to violate GCR 1963, 953(4),[5] DR 1-102(A)(1)[6] and DR 9-102(B)(4).[7] In an agreement dated October 4, 1980 and a clarifying letter dated September 26, 1980, Barbara admitted the charges in exchange for a stipulation by the Grievance Administrator to a suspension of three years and one day, beginning February 15, 1981.
On February 5, 1981 Barbara entered into a stock purchase agreement with Sheldon Otis[8] and Barbara & Associates. The agreement provided for Barbara to transfer one share of stock in the corporation to Otis in exchange for a promissory note executed by Otis in the amount of $5,000.00. The note executed by Otis was payable in bi-weekly installments over a ten year period at six percent (6%) interest.
The stock purchase agreement also provided that Barbara's remaining 749 shares of stock were to be redeemed by the corporation for $3,365,000. Barbara, acting as president of Barbara & Associates, executed a promissory note in favor of Barbara individually in the amount of $3,365,000. The agreement provided for $1,695,000 of the principal to be paid over a ten year period in equal bi-weekly installments with interest accruing at six percent (6%). The note also provided that a lump sum payment of $1,670,000 was to be due and payable on February 1, 1991.
The agreement acknowledged that Barbara owed the corporation the amount of $1,639,368.[9] Under the terms of the note, interest was to be computed at a rate of 12.25% and payable annually with the principal due and payable on February 1, 1991. The note provided further:
[A]nd on said date [February 1, 1991] said principal amount shall be credited by the amount of the lump sum payment due on such date in accordance with a *189 promissory note dated even date herewith as described in paragraph 3 of a stock purchase agreement dated February 5, 1981 between the undersigned Peter R. Barbara & Associates, P.C. and Sheldon Otis.
Four months later on May 18, 1981, a federal grand jury investigating Barbara & Associates issued a criminal information against Barbara. The information charged Barbara had unlawfully devised a scheme to obtain money from October 1974 through August 1980. Significantly, the information charged Barbara had converted client trust funds as early as 1974, five years before the corporation, according to Barbara, began to experience cash flow problems.
Additionally, the information charged that Barbara transferred approximately $3,000,000 from the client trust accounts to the general accounts and that the monies were improperly used for the operation of the corporation, even though $1.5 million had been returned. Count I of the information also charged Barbara had violated 18 U.S.C. § 1341 (mail fraud). Counts II and III charged Barbara with violation of 18 U.S. Code § 2314 (interstate transportation of a forged security). On July 23, 1981 Barbara pleaded guilty to all counts and was sentenced to two concurrent prison terms of two and a half years on each count and fined a total of $16,000. He was later incarcerated in a federal penitentiary from September 1981 through June 1983. As a result, Barbara, who was also a member of the State Bar of New York, was suspended by the New York State Bar on April 26, 1982 and subsequently disbarred.
On March 22, 1982, the corporation changed its name to Otis & Edwards, P.C. Three months later, on June 16, 1982 the corporation filed a Chapter 11 petition in bankruptcy. On August 3, 1983, in an effort to prepare a viable plan of reorganization, the Trustee filed an amended corporate tax return for fiscal year ending January 31, 1981. The amended return sought a determination from the Internal Revenue Service (IRS) that outstanding loan balances of $1,776,583 were uncollectible bad debts pursuant to 26 U.S.C. § 166. Included in the amount was the $1,641,868 in loans to Barbara and $134,670 in loans to persons unrelated to the members of the law firm. A determination that the loans were uncollectible bad debts would result in a $5,000 refund to the Debtor. The trustee argued that of the $1,776,583 in loans, $1,641,868 was uncollectible due to Barbara's incarceration and suspension of his license to practice in the States of Michigan and New York.
On July 3, 1984, the IRS issued a thirty-day letter notifying Otis & Edwards of a deficiency. The IRS allowed the bad debt deduction for loans to unrelated persons but disallowed the deduction for the loans to Barbara. The adjustment in tax liability decreased the $686,017 tax liability by $57,384 and the penalty by $2,867. In a detailed summary and analysis, the IRS found the withdrawals from the corporation to Barbara to be dividends. (Exhibit A). Having closely examined the intent of the parties at the time of the transactions and other factors outlined in Baird v. Commissioner, 82,220 P-H Memo TC Volume 51 (1982), the IRS determined the withdrawals to be dividends lacking sufficient indicia of loans to constitute a bona fide debt under 26 U.S.C. § 166. The Debtor timely filed a protest to the 30 day letter but review was denied by the IRS.
The Trustee has filed the present motion pursuant to 11 U.S.C. § 505 seeking a bad debt deduction in the amount of $1,651,858. The Trustee relies on Johnson v. Commissioner [CCH Dec. 35, 807 (M)] 38 TC Memo 17, 20 (1979), Aff'd. 652 F.2d 615 (6th Cir.1981), and argues the withdrawals from the corporation were bona fide loans which became worthless in 1980. The Trustee also asserts that the statute of limitations for classifying a large portion of the Debtor's transactions as dividends has expired and that the I.R.S. is estopped from classifying the transactions as dividends.
The government has filed objections to the motion arguing the amounts withdrawn by Barbara from the corporation are dividends. *190 Alternatively, the government argues that if the amounts withdrawn are deemed to be bona fide loans, the debt did not become worthless in fiscal year 1980.
As a threshold matter, 11 U.S.C. § 505 empowers the Bankruptcy Court to determine the tax liability of a debtor provided the merits of the tax claim has not been previously adjudicated in a contested proceeding before a court of competent jurisdiction. A matter is deemed contested if the debtor has filed a petition in the United States Tax Court prior to the commencement of proceedings in the Bankruptcy Court and the I.R.S. has filed an answer to the petition. 11 U.S.C. § 505, 124 Cong. Rec. H 11, 110-111 (Sept. 28, 1978); S 17, 426-28 (Oct. 6, 1978). Although the parties have stipulated, and we find, that these proceedings are properly before the Court, their view of the role of the Bankruptcy Court under § 505 is misplaced. The Bankruptcy Court is not an appellate court and does not exercise de novo or clearly erroneous review of a determination of the I.R.S. In the motion before the Court, the Trustee begins anew his pursuit of a bad debt deduction under 26 I.R.C. § 166(a).
Section 166(a) allows a deduction for any debt that becomes worthless within a taxable year. For purposes of determining whether a bad debt deduction exists the existence of a debt presupposes the existence of a loan. Piggy Bank Stations, Inc. v. C.I.R., 755 F.2d 450, 453 (5th Cir., 1985), cert. denied ___ U.S. ___, 106 S.Ct 130, 88 L. Ed. 2d 107 (1985). The character of the debt depends on the intent of the parties at the time the transfer was made. If the intent was primarily to benefit the shareholder, the transfer is deemed to be a dividend. Johnson, 38 TCM at 20. Only a bona fide debt qualifies for purposes of § 166. Bona fide debts arise from debtor-creditor relationships upon a valid and enforceable obligation to pay a fixed or determinable sum of money. Tres.Reg. § 166-1(c).
In seeking the deduction the taxpayer has the burden of establishing by a preponderance of the evidence that the withdrawals from the corporation were bona fide debts which became worthless within a specific tax year. K & R Service Co., Inc. v. United States, 568 F.Supp 38 (D.Mass. 1983); Piggy Bank Stations, supra.
Several objective factors are used to determine the subjective intent of the parties to create a bona fide debt.[10] Despite the many variations, two conclusions can be *191 drawn regarding the weight to be given each factor individually and collectively. No one single factor is determinative of the taxpayers subjective intent, Joel Urangra v. Commissioner, 46 TCM Memo 567, 572 1983-373 Dec. 40, 234 (M), and the factors can be grouped into three categories: (1) the intent of the parties, (2) the form of the instruments and (3) the objective economic reality of the taxpayer.[11]K & R Service Co., Inc., 568 F.Supp at 41. Balancing the three categories characterizes the nature of the transaction.
The Trustee maintains that the test outlined in Johnson, supra, demonstrates the transactions between Barbara and the corporation were bona fide debts. The Johnson test requires consideration of the following factors: (1) whether the corporation is closely held and controlled; (2) the corporation's history with respect to dividends; (3) the availability of earnings and profits from which the corporation could pay dividends; (4) whether the transfer was documented by notes or an assignment of security; (5) the payment or accrual of interest; (6) whether transfers were made in proportion to stock holdings; (7) how the transferred funds were used; (8) how the transfer is treated on the books and records of the corporation and the shareholder; (9) whether the shareholder had a plan and means for repayment; and (10) the history of repayment. Johnson, 38 TC Memo at 20.
Throughout the period in which the withdrawals took place, Barbara was the corporation's majority or sole shareholder and president. When a taxpayer seeks a bad debt deduction and the transaction at issue involves advances from a closely held corporation to "one who is in substantial control of the corporation, such control invites special scrutiny of the transactions." Uranga, 46 TC Memo at 567; Caligiuri v. C.I.R., 549 F.2d 1155 (8th Cir.1977); Matter of Uneco, Inc., 532 F.2d 1204 (8th Cir. 1976); Transamerica Insurance Co. v. Womack, Inc., 31 A.F.T.R.2d, 73-471 (E.D. Va.1972), affirmed, 33 AFTR2d 74-999 (4th Cir.1974); Dumire v. Commissioner, 42 T.C. Memo 438 (1981). Scrutinizing the transactions before the Court finds the Trustee's position inconsistent and unsupported in either direction.
Barbara's inability to recall any of the Board's activity coupled with the Trustee's failure to produce corporate records militates against a finding that the withdrawals were properly documented. The absence of documents is significant when examined alongside the testimony of Herbert Goldstein.
Goldstein was a certified public accountant who had been associated with Barbara since 1967 and whose association continued through 1982. Goldstein's accounting firm was retained by the corporation to set up accounting procedures, prepare monthly profit and loss statements, and year end tax returns. He testified that he recalled seeing a resolution in the corporation's minute book authorizing Barbara to withdraw loans from the corporation. Despite his representations, no attempt was made to support Goldstein's testimony and establish the Board's authorization. There has been no demonstration on the record of the impracticality of obtaining the corporation's documents. Declarations of intentions to treat certain transactions as a loan are an insufficient basis from which this Court can find the existence of a debt. Declarations do not provide "reliable indicia of a debt which indicate the intrinsic economic nature of the transaction." Alterman Foods, Inc. v. United States, 505 F.2d 873, 877 (5th Cir.1974) citing Fin Hay Realty Co. v. United States, 398 F.2d 694, 697 (3rd Cir.1968).
*192 Indebtedness is indicated by the issuance of a bond, debenture, or promissory note. In re: Lane, 742 F.2d 1311 (11th Cir.1984). The absence of an assignment of security has been viewed by many courts as a key factor against finding bona fide indebtedness. Piggybank Stations, Inc., supra; Matter of Uneco, Inc., supra; Johnson, supra. The issuance of an unsecured note due on demand and containing no specific maturity date and no payment is insufficient evidence of a genuine debt. Stinnett's Pontiac v. C.I.R., 730 F.2d 634, 638 (11th Cir.1984), Accord, In re: Lane, supra. Stinnett adopted the 5th Circuit rule in Dillin v. United States, 433 F.2d 1097 (5th Cir.1970), that "the presence of a definite maturity date in a definite obligation to repay is a highly significant feature of a debtor-creditor relationship," Stinnett's Pontiac, 730 F.2d at 638, and that the absence of the date militates against a finding of a bona fide debt. Id. Accord, In re: Lane, supra. See also, Caligiuri, 549 F.2d at 1157. We find the April 1, 1972 note lacks the essential character of a bona fide debt outlined in Stinnett. It is unsecured, contains no maturity date and as the testimony and exhibits reveal, although payments to the corporation have been recorded on the corporation's ledgers, the numbers recorded are at best questionable.
The Trustee contends the $1.1 million in payments recorded on the corporation's general ledger is the best indicator of the validity of the transactions. A corporation's general ledger will usually reveal how payments on the receivables have been treated by the corporation. The government asserts, and this Court agrees, that in these proceedings the corporate ledger is not a beacon in the Debtor's troubled financial night enlightening the Court of the Debtor's financial affairs. At best the light is but a flickering flame giving way to the vast darkness which abounds.
The ledger sheets do not reconcile the differences between Barbara's testimony that promissory notes were periodically issued and subsequently refinanced by a blanket note and the trustee's contention that the April 1, 1972 note relates to previous or future withdrawals from the corporation. There is no record that the promise to pay $104,962.83 was issued to cover the loan balance outstanding at the close of the 1971 fiscal year. There is no clear evidence that the note envisions future withdrawals[12] from the corporation or that the payments were distributed to both principal and interest as provided for by the terms of the note.
A debtor has the right to direct the application of a payment before or at the time of payment. Federal Land Bank of St. Louis v. Wilson, 719 F.2d 1367, (8th Cir.1983); In re: American Gypsum Co., 36 B.R. 360 (Bkrtcy.D.N.M.1984); In the Matter of Goehring, 23 B.R. 323 (Bkrtcy. W.D.Mich.1983). Where the debtor provides written instructions or has agreed with the creditor on how a payment is to be applied, and the creditor accepts the payment, the creditor is obligated to apply the payment as directed and cannot change or revoke that direction without the consent of the debtor. American Gypsum Co., Inc., 36 B.R. at 362. A debtor can communicate instructions on how the payment is to be applied by simply recording the note number or date of the note on the checks. Id. In these proceedings the cancelled checks of the payments have not been introduced into evidence. There is no indication whether Barbara directed or understood the payments were to be applied to the April 1, 1972 note, or other notes said to have been issued, or applied against previous loan receivables.[13]
*193 Our concern for the general ledger is warranted by Goldstein's testimony that he never saw a promissory note; never inquired about the validity of the loans; and that upon inquiry about repayments of the withdrawals was told that a program would have to be worked out at some time in the future. He testified that in his opinion in the early years Barbara could easily repay the outstanding loan balances. He also testified that although some form of repayment plan was in effect during the early years, the frequency of payment was uncertain; and that as the loan balances increased, the sporadic payments were minuscule in comparison to the tenfold increase in the loan receivables to Barbara in 1980. By that time, Barbara's payments were made solely from future advances from the corporation. (See Deposition transcript at pp. 38 & 39) Under the facts presented here, the recording of payments on the general ledger is neither a proof of a plan of a repayment nor an indicator of Barbara's intent to repay the corporation. When repayment is possible solely by future advances, the withdrawals lose all semblance of loans and take on the character of dividends. Stinnett, supra.
The plan and means of repayment runs further afoul when viewed against the backdrop of the economic reality of the Debtor. The three factors of the Johnson test, whether transfers were made in proportion to stockholdings, the corporation's history with respect to dividends, and the availability of earnings and profits from which the corporation could pay dividends, would normally be significant factors in determining the economic position of the debtor. Here, however, the parties agree that the withdrawals were made in proportion to Barbara's stockholdings; and the corporation's history as to dividends and payment of dividends is of little consequence. The economic reality of the Debtor is revealed by Barbara's admissions.
Barbara admitted all counts of the criminal information and the consent judgment entered by the State Grievance Commissioner as to the unlawful use of client trust funds for business and personal use. As early as 1974 client trust funds were intermixed and laundered through the general account and later became the only means of repaying the corporation. The array of activity to pay corporate expenses amounted to a kiting of funds to maintain the corporation. Barbara was soon faced with a trilemia of problems: suspension from the practice of law, criminal charges, and the loss of the firm which he had founded. In our view, application of the Johnson test reveals the parties did not possess the subjective intent to create a bona fide debt at the time the withdrawals were made.
Assuming, for the moment, that the withdrawals are loans, we find the debt did not become worthless in fiscal year 1980. A finding that a debt is worthless requires consideration of "all pertinent evidence, evidence of the value of the collateral, if any, securing the debt and the financial condition of the debtor are to be considered." Estate of Mann, 731 F.2d 267, 275 (5th Cir.1984). The Debtor must determine that the debt has lost all potential value. "Debts are wholly worthless when there are reasonable grounds for abandoning any hope of repayment in the future, Dallmeyer v. Commissioner, 14 T.C. 1282, 1292 (1950), and it could thus be concluded that they have lost their last vestage of value." Estate of Mann, 731 F.2d at 276, citing Bodzy v. Commissioner, 321 F.2d 331, 335 (5th Cir.1963). The burden is on the debtor to show some identifiable event demonstrating the worthlessness of the debts. Holland v. C.I.R., 728 F.2d 360, 362 (6th Cir.1984); Estate of Mann, 731 F.2d at 276.
We agree with the Trustee that the Debtor need not be an extreme optimist about collecting on the debt. But absent *194 from the record before the Court is any attempt by the Debtor to collect on the debt or a showing that the assets acquired by Barbara had been seized by other creditors. Suspension from the practice of law is not an indicator of the worthlessness of a debt. Moreover, it is difficult for the Court to find a debt uncollectible where, as here, the Debtor seeking the deduction has agreed to pay $3,365,000 to redeem shares which were part of Barbara's "substantial net worth." This is especially true in light of the stock purchase agreement being signed just days after the close of the Debtor's 1980 fiscal year and weeks before the effective date of suspension.[14]
The Court also finds the Debtor, by the terms of the stock purchase agreement, had the right to set off the debt owed by Barbara prior to the maturity date of the agreement. "A right to equitable set off [sic] attaches where mutual demands exist and where insolvency has intervened even though one of the demands has not yet matured." American Surety Company of New York v. City of Akron, 95 F.2d 966, 970 (6th Cir.1938).
Our findings foreclose any further discussion on the Trustee's arguments relating to estoppel and statute of limitations. Accordingly, we find the withdrawals from the corporation to Peter R. Barbara to be dividends for purposes of 26 U.S.C. § 166. The bad debt deduction is DISALLOWED and the motion is DENIED.
IT IS SO ORDERED.
NOTES
[1] Between 1970 and 1982 the corporation changed from Barbara & Wisok, P.C. to Barbara, Ruby, Domol, Bowerman, Miller & Aaron, P.C.; to Peter R. Barbara & Associates, P.C. in 1977; to Otis, Peters, Becker & Pietsch, P.C. and eventually to Otis & Edwards on March 22, 1982.
[2] The corporation's fiscal years ran from 2/1 through 1/31 of each year.
[3] The deposition was taken as part of Webster v. Barbara, Adversary Proceeding No. 83-1310.
[4] It is unclear whether the language pertains to an extension of a maturity date or whether this is language used by the Trustee, infra, that the note allows future withdrawals from the corporation to Barbara.
[5] GCR 953(4): conduct that violates the standards or rules of professional responsibility adopted by the Court;
[6] DR 1-102(A)(1): A lawyer shall not (1) Violate a Disciplinary Rule.
[7] DR 9-102(B)(4): A lawyer shall (4) Promptly pay or deliver to the client as requested by a client the funds, securities, or other properties in the possession of the lawyer which the client is entitled to receive.
[8] Sheldon Otis represented Barbara before the Attorney Grievance Commission and is the named partner in the Debtor corporation.
[9] The amount is $2,500 more than the loan receivable balance shown on Exhibit F. When asked about the stock purchase agreement Barbara, in the deposition, could not explain the difference in the figures. (Deposition TR. at 37).
[10] For purposes of 26 U.S.C. § 166 the Courts have used a variety of tests with numerous factors to determine if advances constitute bona fide debts. Additional factors are used to distinguish loans from shareholders to the corporation from contributions to capital. In Stinnett's Pontiac Service, Inc. v. C.I.R., 730 F.2d 634 (5th Cir.1984) thirteen factors were considered:
(1) the names given to the certificates evidencing the indebtedness; (2) the presence or absence of a fixed maturity date; (3) the source of payments; (4) the right to enforce payment of principal and interest; (5) participation in management flowing as a result; (6) the status of the contribution in relation to regular corporate creditors; (7) the intent of the parties; (8) "thin" or adequate capitalization; (9) identity of interest between creditor and stockholder; (10) source of interest payments; (11) the ability of the corporation to obtain loans from outside lending institutions; (12) the extent to which the advance was used to acquire capital assets; and (13) the failure of the debtor to repay on the due date or to seek a postponement.
See also, Estate of Mixon v. United States, 464 F.2d 394 (5th Cir., 1972), Accord, Matter of Uneco, Inc., 532 F.2d 1204 (8th Cir., 1976); In re: Lane, 742 F.2d 1311 (11th Cir., 1984).
Piggy Bank Stations, Inc. v. C.I.R., 755 F.2d 450 (5th Cir., 1985) narrowed the factors to five:
(1) whether the parties intended to create an unconditional obligation to repay, (2) whether the shareholder controlled the corporation, (3) whether any security was given, (4) whether there was a maturity date and a specific repayment schedule, and (5) whether the shareholder had the ability to repay.
755 F.2d at 453.
In Joel Uranga v. Commissioner, 46 T.C.M. 567 [CCH] (1983), the court applied a ten point test:
the extent of stockholder control, the dividend history of the corporation, the magnitude of the advances, the presence or absence of conventional indicia of debt, the treatment of advances in the corporate financial statements, authorization by the corporation, the pledging of collateral as security, the payment of interest, and the ultimate repayment of the amounts withdrawn.
46 T.C.M. at 572.
[11] K & R Service Co., Inc. found determination of whether a transaction qualifies under Tres. Reg. § 1.166-(c) "necessitates consideration of a number of different factors." [citation omitted] The many relevant criteria enumerated in the case law, see, eg. [sic] In re: Uneco, Inc., 532 F.2d 1204, 1208 (8th Cir., 1976), Smith v. Commissioner, 370 F.2d 178, 190 (6th Cir., 1966), fall roughly into three categories: (1) the intent of the parties; (2) the form of the instruments; and (3) the objective economic reality. K & R Service Co., 568 F.Supp at 41.
[12] Conceivedly the note could have been an attempt to refinance the "loans" outstanding as of January 31, 1972 and included loans made from February 1, 1972 thru April 1, 1972. But the Trustee has not directed the Court to language within the note allowing future withdrawals. Absent the Board's minutes, the only language envisioning future activity relating to the note is the wholly ambiguous language discussed on page 4, footnote 4, supra.
[13] The Trustee has argued that the accrued interest on the note was paid by Barbara and that an interest deduction was taken on his personal income tax. Despite Barbara's testimony that interest was paid, the general ledgers fail to make clear how much interest was paid. Further, because Barbara's personal income tax returns have not been produced, the Court cannot determine the amount of interest deduction taken.
[14] The Court does not overlook the testimony of Fred J. Dery, a certified public accountant, regarding the insolvency of the Debtor. The Trustee proffered the testimony and the insolvency report (Exhibit C) to show the debt was uncollectible. Dery testified and Exhibit C reveals, that the audit was not according to generally accepted auditing standards or GAAS. The letter provides in pertinent part:
Our examination does not include the application of audit procedures sufficiently comprehensive to constitute an examination in accordance with generally accepted auditing standards. Had we performed additional procedures or made an examination of the financial statements in accordance with generally accepted auditing standards, matters might have come to our attention which would require disclosure.
Because the above procedures do not constitute an examination made in accordance with generally accepted auditing standards, we do not express an opinion on any of the accounts referred to above. This report relates to the items specified above and does not extend to any financial statements taken as a whole.
(Emphasis added)
Dery prepared an accountant compilation audit which in his opinion was the lowest level of audit to be performed. In contrast to an audit prepared according to GAAS, compilation reports are generally viewed as the representations of management and, therefore, management has the responsibility for them. How to Find Negligence and Misrepresentations in Financial Statements, § 4.27, Irving Kellogg, Esq., CPA (1979), (Supplement 1984). Coupled with our finding on the general ledger, the Dery testimony and report adds little to Debtor's cause. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543772/ | 389 Pa. Super. 438 (1989)
567 A.2d 684
F. Emmett FITZPATRICK, Appellant,
v.
PHILADELPHIA NEWSPAPERS, INC. and Anthony Lame.
Supreme Court of Pennsylvania.
Argued April 18, 1989.
Filed December 14, 1989.
*440 James E. Beasley, Philadelphia, for appellant.
Frank L. Corrado, Jr., Philadelphia, for appellees.
Before ROWLEY, POPOVICH and JOHNSON, JJ.
ROWLEY, Judge:
On November 10, 1974, the Philadelphia Inquirer printed an article headlined "D.A. Gets Ex-Client Off Light." The article reported that appellant F. Emmett Fitzpatrick, then Philadelphia District Attorney, had recommended that Joseph Nardello, who was being sentenced for his fifth felony, be placed on probation. According to the article, U.S. Supreme Court records showed that "in 1968, while a defense attorney, Fitzpatrick represented Nardello and a codefendant in a criminal case." Appellant subsequently instituted the present action for defamation against appellees Philadelphia Newspapers, Inc., the publisher of the Inquirer, and Inquirer reporter Anthony Lame, the writer of the allegedly defamatory article.
Two assertions lie at the heart of appellant's claim. First, appellant contends that he did not recommend probation for Nardello, but instead informed the sentencing judge *441 that his office would have no objection to a sentence of probation and, in a phrase omitted from the Inquirer article, that "[w]e leave the matter entirely to your Honor." Second, appellant asserts that while he had once presented to the U.S. Supreme Court a legal argument that was applicable to the case of Joseph Nardello, a client of A. Charles Peruto, as well as to the case of his own client, Isadore Weisberg, he did so because the rules of the Supreme Court allowed only one lawyer to argue on behalf of the two similarly situated clients. Nardello was never his "client," appellant asserts, nor did he ever "represent" Nardello.
At the close of the trial of appellant's libel action, the jurors were supplied with a verdict sheet which asked 1) whether the November 10, 1974 article was defamatory of appellant; 2) if so, whether the article was false; 3) if the article was both defamatory and false, whether appellees published it with either actual knowledge that it was false or with subjective awareness of its probable falsity (i.e., with malice); 4) if they did, whether appellant sustained actual injury as a result of the publication of the article; and 5) if he did, what amounts of compensatory and punitive damages should be assessed. The jury answered no to the first question, thus finding in favor of appellees without having to consider the remaining questions. Post-trial motions were filed and denied, judgment has been entered on the verdict, and appellant's appeal is now before us. We affirm the judgment in favor of appellees.
Of the ten issues raised by appellant in this appeal, nine allege error on the part of the trial court. Appellant contends that the trial court erred in: 1) allowing testimony that appellant had taken the Fifth Amendment in a prior, unrelated proceeding; 2) refusing to instruct the jury that, as a matter of law, there was no attorney-client relationship between appellant and Nardello; 3) refusing to instruct the jury that the challenged article was, as a matter of law, defamatory; 4) instructing the jury that the defamatory nature of the challenged article must be proved by clear and *442 convincing evidence; 5) instructing the jury that they were to give words "their ordinary meaning" and "not pick out and isolate particular words or phrases," thus allowing the jury to reach an incorrect conclusion regarding the existence of an "attorney-client" relationship; 6) failing to answer questions submitted by the jurors in a manner that would alleviate their evident confusion; 7) refusing to grant a new trial on the ground that defense counsel, during closing argument, compared appellant to a mentally deranged movie character; 8) refusing to instruct the jury that an adverse inference could be drawn from the failure of appellee Anthony Lame, the writer of the challenged article, to appear as a witness; and 9) refusing to grant a mistrial after Carl Lunkenheimer, a former assistant district attorney, made highly prejudicial remarks concerning appellant and his counsel.
Although we have reviewed appellant's claims of trial court error and have concluded that one or more of the claims may well have merit, it is appellant's remaining claim which proves to be dispositive of this appeal. Appellant contends that, in addition to having established the falsity of the challenged article, he has also met the burden, imposed on defamation plaintiffs who are public officials by the U.S. Supreme Court's decision in New York Times Company v. Sullivan, 376 U.S. 254, 279-80, 84 S. Ct. 710, 726, 11 L. Ed. 2d 686 (1964), of proving by clear and convincing evidence that in publishing the challenged article appellees acted with actual malice, that is, knowing the article was false or with reckless disregard of its truth or falsity, Curran v. Philadelphia Newspapers, Inc., 376 Pa.Super. 508, 512-13, 546 A.2d 639, 642 (1988), alloc. denied, 522 Pa. 576, 559 A.2d 37 (1989). Having reviewed the record that has been certified to this Court, as well as the briefs and arguments of the parties, we are constrained to disagree. Our decision to affirm the trial court on this basis makes it unnecessary for us to decide the other issues raised by appellant, except to the extent that they have an impact upon the question of actual malice.
*443 Preliminarily, we note that our conclusion that the actual malice issue is controlling rests on several considerations. It is, of course, settled law that we may affirm the decision of the trial court if it is correct on any ground. E.J. McAleer & Co., Inc. v. Iceland Products, Inc., 475 Pa. 610, 613 n. 4, 381 A.2d 441, 443 n. 4 (1977). The actual malice issue has in fact been presented to, and addressed by, the trial court. Appellees asserted in their trial brief that the facts of the case did not show actual malice; they made the same assertion in support of their unsuccessful motion for entry of a nonsuit at the close of appellant's case; they sought a directed verdict, also unsuccessfully, at the close of the evidence; in response to appellant's post-trial motions, they filed an "alternative motion for post-trial relief" arguing, as an alternative basis for entry of judgment, that the trial court's denial of their motions for nonsuit and for a directed verdict was erroneous in view of appellant's failure to prove actual malice; and the trial court addressed this issue in its opinion of September 21, 1988.[1]
In addition, the parties have raised the actual malice issue in this appeal. Appellees urge us to affirm the judgment entered in their favor on the basis of what they contend is appellant's failure to prove actual malice. Appellant, as noted above, asserts that he has met his burden of proving the existence of actual malice with clear and convincing clarity.
There is, finally, an even more fundamental basis for our conclusion that actual malice is the controlling question in this case. The sufficiency of the evidence to support a jury's finding of actual malice is a question of law, Harte-Hanks Communications, Inc. v. Connaughton, ___ U.S. ___, ___, 109 S. Ct. 2678, 2694, 105 L. Ed. 2d 562 (1989), and a court reviewing such a finding is required to "`exercise independent judgment and determine whether the record *444 establishes actual malice with convincing clarity,'" id. at ___, 109 S.Ct. at 2681 (quoting Bose Corporation v. Consumers Union, 466 U.S. 485, 514, 104 S. Ct. 1949, 1967, 80 L. Ed. 2d 502 (1984)). Our duty in this regard is constitutionally based, id., and derives from "[o]ur profound national commitment to the free exchange of ideas, as enshrined in the First Amendment," id. at ___, 109 S.Ct. at 2695.
"Judges, as expositors of the Constitution," have a duty to "independently decide whether the evidence in the record is sufficient to cross the constitutional threshold that bars the entry of any judgment that is not supported by clear and convincing proof of `actual malice.'"
Id. (quoting Bose Corporation v. Consumers Union, 466 U.S. at 511, 104 S.Ct. at 1965). For that reason, after this Court, reviewing the appeal of the defendant publisher in Sprague v. Walter, 357 Pa.Super. 570, 589-90, 516 A.2d 706, 716-17 (1986), aff'd, 518 Pa. 425, 543 A.2d 1078 (1988), appeal dismissed, ___ U.S. ___, 109 S. Ct. 548, 102 L. Ed. 2d 576 (1988), determined that a new trial was warranted to remedy an error of law by the trial court, the Court went on to review the record to determine whether the evidence was constitutionally sufficient to warrant a finding of actual malice or whether, on the contrary, the evidence was insufficient in that regard and the defendant was therefore entitled to judgment n.o.v. Indeed, when the U.S. Supreme Court first established the actual malice requirement for plaintiffs who are public officials in New York Times v. Sullivan, supra, the Court, after reversing the judgment entered in favor of the plaintiff, observed that "[s]ince [plaintiff] may seek a new trial, we deem that considerations of effective judicial administration require us to review the evidence in the present record to determine whether it could constitutionally support a judgment for [plaintiff]." 376 U.S. at 284-85, 84 S.Ct. at 728. After making "`an independent examination of the whole record,'" id. at 285, 84 S.Ct. at 729 (quoting Edwards v. South Carolina, 372 U.S. 229, 235, 83 S. Ct. 680, 683, 9 L. Ed. 2d 697 (1963)), the Court held that the evidence of actual malice was *445 constitutionally insufficient to sustain a judgment for the plaintiff, id. 376 U.S. at 286, 84 S.Ct. at 729.
The same "considerations of effective judicial administration" which led to these decisions suggest that granting a new trial in the present case on the basis of trial court error might well prove to be an unnecessary and futile gesture if we do not first determine that the evidence offered by appellant would, on remand, be constitutionally sufficient to sustain a finding of actual malice. Accordingly, we will examine the record to determine whether, as appellant asserts, there exists clear and convincing evidence of actual malice. In addition, in order to determine whether evidence of actual malice may have been improperly excluded, we will consider appellant's claim that the court erred in refusing to instruct the jury that an adverse inference could be drawn from appellee Anthony Lame's failure to testify.[2] Appellant avers that Lame is "a party to this action having knowledge bearing on the questions of falsity and actual malice" (Amended Brief for Appellant at 42).
It is indeed settled law that a party's failure to testify at a civil trial raises an inference of fact that the party's testimony would have been adverse or unfavorable to him. Beers v. Muth, 395 Pa. 624, 626-27, 151 A.2d 465, 465 (1959); Pratt v. Stein, 298 Pa.Super. 92, 151, 444 A.2d 674, 705 (1982); Schwegel v. Goldberg, 209 Pa.Super. 280, 284-85, 228 A.2d 405, 408 (1967). The fact that Lame was available to be called by either side does not bar the application of this rule, as it would if he were a non-party witness. Pratt v. Stein, 298 Pa.Super. at 151-52 n. 51, 444 A.2d at 705 n. 51; but see Bulman v. Myers, 321 Pa.Super. 261, 265-66, 467 A.2d 1353, 1355-56 (1983) (affirming refusal of adverse inference instruction without distinguishing between party-defendant, who was available but did not testify, and a non-party witness). However, if a plaintiff has not supplied evidence sufficient to meet his burden of proof, the adverse inference created by the defendant's failure to testify will not supply it for him. Harring v. *446 Com., Unemployment Compensation Board of Review, 70 Pa.Cmwlth. 173, 176, 452 A.2d 914, 916 (1982) (disapproved on other grounds, Vann v. Com., Unemployment Compensation Board of Review, 508 Pa. 139, 148 n. 2, 494 A.2d 1081, 1085 n. 2 (1985)); see also Pratt v. Stein, 298 Pa.Super. at 151, 444 A.2d at 705 (defendant's failure to testify cannot supply negligence on his part because negligence must be shown affirmatively by plaintiff); Schwegel v. Goldberg, 209 Pa.Super. at 284, 228 A.2d at 408 (same). As this Court explained in Schwegel v. Goldberg, supra, what may be inferred from a defendant's failure to testify is that the plaintiff and his witnesses truthfully described the happening of the events at issue. Id. at 285, 228 A.2d at 408. Thus, even if we assume that appellant was entitled to an adverse inference instruction and that, as a result, appellant and his witnesses should be regarded as credible, we are still required to determine whether the evidence supplied by appellant constitutes clear and convincing evidence that appellees acted with actual malice.[3]
In determining whether appellees acted with actual malice, the standard to be applied is not objective (i.e., *447 whether a reasonably prudent person would have published the challenged article), but subjective. St. Amant v. Thompson, 390 U.S. 727, 731, 88 S. Ct. 1323, 1325, 20 L. Ed. 2d 262 (1968); Curran v. Philadelphia Newspapers, 376 Pa.Super. at 514, 546 A.2d at 643. As the U.S. Supreme Court observes in its recent decision in Harte-Hanks v. Connaughton, supra,
[a]ctual malice . . . requires at a minimum that the statements were made with a reckless disregard for the truth. And although the concept of "reckless disregard" "cannot be fully encompassed in one infallible definition," St. Amant v. Thompson, 390 U.S. 727, 730 [88 S. Ct. 1323, 1325, 20 L. Ed. 2d 262] (1968), we have made clear that the defendant must have made the false publication with a "high degree of awareness of . . . probable falsity," Garrison v. Louisiana, 379 U.S. 64, 74 [85 S. Ct. 209, 216, 13 L. Ed. 2d 125] (1964), or must have "entertained serious doubts as to the truth of his publication," St. Amant, supra [390 U.S.] at 731 [88 S.Ct. at 1325].
___ U.S. at ___, 109 S.Ct. at 2685-86. Failure to investigate, without more, will not support a finding of actual malice, nor will ill will or a desire to increase profits. Id. at ___, 109 S.Ct. at 2685, 2696.
Our review of the record reveals that appellant has failed to provide clear and convincing evidence of actual malice. Appellant, relying on the 1976 decision of the Disciplinary Board of Pennsylvania which found that there had been no attorney-client relationship between himself and Nardello, contends that the absence of such a relationship was a fact which could have been learned by appellees prior to the writing of the challenged article if they had made a "true effort to ascertain the formal legal status of Mr. Fitzpatrick's involvement in the United States Supreme Court" and had not drawn unsupported legal conclusions with "abandon" (Amended Brief for Appellant at 27). Whether additional investigation could have uncovered such a "fact" is highly debatable. At trial, Stephen Gillers, called by the defense as an expert witness in the area of *448 professional responsibility and procedure, testified that in his opinion appellant represented Nardello for purposes of the Supreme Court argument and Nardello was, at the time of the argument, appellant's client (N.T., June 7, 1988, at 36-37). If appellees, prior to publication of the article and without the benefit of a ruling by the Disciplinary Board, had sought expert advice in this matter, it is entirely possible that they would have received an opinion identical to that offered by Mr. Gillers at trial. For that reason, we decline to accept appellant's characterization of the status of appellant's relationship with Nardello as a "fact" which could have been discovered by appellees if they had been sufficiently diligent.
More importantly, however, we focus upon the investigatory efforts actually undertaken by appellees, not upon the additional efforts that might hypothetically have been undertaken. See Curran v. Philadelphia Newspapers, 376 Pa.Super. at 525, 546 A.2d at 648 (focus is upon what defendant did, not upon what it did not do). The answers of appellee Anthony Lame, the writer of the article, to interrogatories propounded by appellant in 1974 and read into evidence at trial indicate that he first learned of appellant's participation in the Nardello case in August 1974 and that the delay in publishing the article was due to his (Lame's) investigation and research. Lame also averred that he examined the entire record of the Nardello case on file with the Clerk of the U.S. District Court for the Eastern District of Pennsylvania and that an associate examined the entire record on file with the clerk of the U.S. Supreme Court. Assuming for the sake of argument that the article's statements on the attorney-client issue were false, and that through additional investigation appellees could have reached the same conclusion in 1974 that was reached by the Disciplinary Board in 1976, we do not perceive in appellees' actions the knowledge of falsity or serious doubts as to truth necessary to support a finding of actual malice. Mere negligence or carelessness, even if such were present here, is not evidence of actual malice. Id. at 519, 546 A.2d *449 at 645. Evidence may be sufficient to support a finding of negligence in failing to discover misstatements, but constitutionally insufficient to show the recklessness required for a finding of actual malice. New York Times v. Sullivan, 376 U.S. at 288, 84 S.Ct. at 730.
Nor do we agree with appellant that the following statement of Anthony Lame, made in 1981 in response to a request for admission, establishes serious doubt on the part of appellees:
Defendant, after reasonable investigation, is without knowledge or information sufficient to form a belief as to the nature of or existence of the attorney-client relationship between F. Emmett Fitzpatrick, Jr. and Joseph Francis Nardello prior to November 10, 1974.
We do not read Lame's answer as an admission that in 1974 he entertained serious doubts as to the truthfulness of the statements made in the challenged article, but as a reluctance in 1981 to offer an opinion on what had become, following the Disciplinary Board's findings and the claims raised by appellant in the present action, a highly technical question of law.
Appellant also argues that appellees' refusal to print a retraction of the allegedly false assertions constitutes some evidence of actual malice. We note, however, that the Inquirer eventually published a front-page article headlined "DA Fully Cleared of Ethics Charges" (N.T., May 31, 1988, at 250). Moreover, while appellant testified that the Inquirer never printed a retraction, he never testified that he had actually asked the newspaper to do so.
Assuming for the sake of argument that the challenged article is both defamatory and false, we conclude that appellant has nevertheless failed to provide clear and convincing evidence that appellees knew of its falsity or published it with reckless disregard of its truth or falsity. For that reason, we affirm the judgment entered in favor of appellees and against appellant.
Judgment affirmed.
NOTES
[1] After discussing the meaning of the term "actual malice," the trial court concluded that the jury made one or more of several determinations, all of which would indicate an absence of actual malice. In fact, as noted above, the jury did not reach the question of actual malice, as they found that the article in suit was not defamatory.
[2] Our review reveals that none of the appellant's other allegations of trial court error bears on the question of actual malice.
[3] Appellees argue that the resolution of the adverse inference issue is controlled by this Court's decision in Sprague v. Walter, 357 Pa.Super. 570, 516 A.2d 706 (1986), aff'd, 518 Pa. 425, 543 A.2d 1078 (1988), appeal dismissed, ___ U.S. ___, 109 S. Ct. 548, 102 L. Ed. 2d 576 (1988), also a defamation action brought by a public figure. In that case, reporter Greg Walter was one of a number of defendants who, by stipulation, were dropped from the case on the condition that the plaintiff be permitted to try the case as though they remained parties to the suit. 357 Pa.Super. at 575 n. 1, 516 A.2d at 709 n. 1. Although Walter did not testify, this Court held that an adverse inference was inappropriate in light of the fact that Walter had been extensively deposed and was available to be called by the plaintiff at trial. Id. at 611, 516 A.2d at 728. This ruling, without more, would dispose of the adverse inference claim raised by appellant in the present case.
On appeal, however, the Supreme Court held that "the issue of whether Walter was medically incapable of being a witness for PNI [the defendant] was one that the trial court itself should have determined, not the jury. . . . In sum, we agree with the Superior Court's conclusion that the trial judge . . . erred in ruling that it was a jury question." 518 Pa. at 442 n. 9, 543 A.2d at 1086 n. 9 (citations omitted). As the basis of the Supreme Court's ruling differs from that of the Superior Court, we do not rely on the Superior Court's ruling in the present case. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543928/ | 81 Md. App. 124 (1989)
567 A.2d 134
ROBERT J. SEIDEL, ET AL.
v.
NICHOLAS C. PANELLA, ET UX.
No. 116, September Term, 1989.
Court of Special Appeals of Maryland.
December 21, 1989.
Certiorari Denied March 9, 1990.
Joseph G. Harrison, Jr. (Williams, Hammond, Moore, Shockley & Harrison, P.A., on the brief), Ocean City, for appellants.
Victor H. Laws, III (Victor H. Laws and Laws & Laws, P.A., on the brief), Salisbury, for appellees.
Argued before MOYLAN, BISHOP and FISCHER, JJ.
FISCHER, Judge.
This case revives the adage that there exist only two requirements in life, one of which is the payment of taxes. Appellants' failure to fulfill this obligation triggered the controversy we are now asked to resolve. At issue is the validity of a final decree entered by the Circuit Court for Worcester County foreclosing appellants' right of redemption on certain tax sale property.
The subject property is lot 1055 located in Montego Bay Mobile Home Park and is improved by a mobile home.[1] Appellants, Robert J. Seidel and Jessie Howard Armentrout, two brothers-in-law who are Baltimore County residents, purchased the property in 1978 for use as a vacation retreat. Whatever the reason, appellants failed to pay the 1985-86 assessed real estate taxes.[2] Consequently, the property was sold to Nicholas and Irene Panella, the appellees, for $1,687.01 during an October 7, 1987 public auction.[3]
On May 12, 1988, the Panellas filed suit to foreclose appellants' right of redemption. A summons directed to the Baltimore City Sheriff was then issued for service upon the appellants at 8819 Victory Avenue, Baltimore, Maryland 21234. That address, taken from the Worcester County Treasurer's Office, was appellant Seidel's address until 1984. Predictably, the summons was returned, "Not Served 6-3-88. Both parties Moved."
The court then signed an order for publication to appear in a Worcester County newspaper until June 1, 1988. The order notified interested persons that the right to redeem lot 1055 would expire after August 8, 1988. On July 25, 1988, counsel for the Panellas filed an affidavit recounting the inability to personally serve the appellants, stating:
That the said Nicholas C. Panella also made a diligent search for Robert J. Seidel and Jessie Howard Armentrout by checking the Baltimore and Metropolitan area phonebooks and information bureau for those areas and was unable to locate any residence or whereabouts for Robert J. Seidel or Jessie Howard Armentrout.
A final order ratifying the sale of the subject property and foreclosing appellants' right of redemption was entered on August 10, 1988. The clerk's office mailed a copy of that order to appellants at the incorrect Victory Avenue address. Not surprisingly, it was returned as undeliverable.
When the Panellas took possession of the property, they discovered a propane delivery ticket reflecting a different address for Mr. Armentrout. Upon telephoning the propane company, the Panellas learned Mr. Armentrout's correct address. They wrote informing him of the tax sale and offering to return any personal property. On September 7, 1988, the appellants filed a motion to vacate the decree foreclosing their right of redemption.
Appellants first alleged that they had no knowledge of the sale. They also contended that the affidavit filed by the Panellas' attorney was legally insufficient. Mr. Armentrout's correct address, appellants further argued, could easily have been discovered through a reasonable investigation, including a title search. Moreover, the appellants stated that the property was occupied periodically during May and June, 1988 and continuously during July, 1988. Last, they noted that a copy of the order for publication was not mailed as required. In sum, appellants asserted that the Panellas' failure to comply with applicable notice requirements constituted constructive fraud.
The Panellas responded, essentially denying appellants' allegations. Both parties requested a hearing on the motion. By order dated October 20, 1988, the court denied appellants' motion to vacate, ruling that their constructive fraud argument was nonmeritorious. A hearing was not conducted.
On October 28, 1988, the Panellas filed a motion to alter or amend, seeking to clarify the order of October 20, 1988. Three days later, appellants moved for reconsideration, arguing, among other things, that a hearing on the motion to vacate was mandatory. On December 16, 1988, the court denied appellants' motion for reconsideration and issued an amended order, again denying the motion to vacate. Appellants subsequently appealed "from the Order of Court Denying [their] Motion to Vacate Decree Foreclosing Right of Redemption entered on October 20, 1988, as amended by Amended Order of Court dated December 16, 1988, and the Order granting [the Panellas'] Motion to Alter or Amend Judgment entered on December 16, 1988."
For convenience, we summarize this chronology as follows:
August 10, 1988 order entered foreclosing appellants' right of redemption
September 7, 1988 appellants filed motion to vacate August 10 order
October 20, 1988 appellants' motion to vacate denied
October 28, 1988 Panellas filed motion to alter or amend October 20 order
October 31, 1988 appellants filed motion for reconsideration of October 20 order
December 16, 1988 appellants' motion for reconsideration denied and amended order entered.
Claiming that appellants have taken "too many bites of the apple," the Panellas seek to dismiss this proceeding. Specifically, they argue that the appellants have forfeited their right to appeal by filing two successive motions to revise. The Panellas also contend that this appeal, filed January 17, 1989, is untimely with respect to the August 10, 1988 judgment which foreclosed appellants' right of redemption. In conjunction, much is made of the fact that appellants did not appeal the denial of their motion for reconsideration. We, however, are not persuaded by these arguments.
The Panellas misstate the procedural posture of this case, and we will attempt to clarify. Admittedly, this scenario has numerous wrinkles; the first concerns the point at which an appealable final judgment was entered.[4] To be appealable, "A judgment must be so final as to determine and conclude rights involved, or deny the appellant means of further prosecuting or defending his rights and interests in the subject matter of the proceeding." Peat & Co. v. Los Angeles Rams, 284 Md. 86, 91, 394 A.2d 801 (1978) (quoting United States Fire Ins. v. Schwartz, 280 Md. 518, 521, 374 A.2d 896 (1977)). Certainly, the August 10 order foreclosing the right of redemption satisfied this test. Scheve v. McPherson, 44 Md. App. 398, 403, 408 A.2d 1071 (1979); Md.Tax-Prop.Code Ann. § 14-844.
Our question, however, concerns the effect of the October 20 order. That order denied appellants' request, under Md.Tax-Prop.Code Ann. § 14-845 and Maryland Rule 2-535, to reinstate their right of redemption. Generally, an appeal from the denial of a Rule 2-535 motion is limited to "whether the hearing judge abused his discretion." B & K Rentals & Sales Co. v. Universal Leaf Tobacco Co., 73 Md. App. 530, 537, 535 A.2d 492 (1988); Radvan-Ziemnowicz v. Commission on Medical Discipline, 302 Md. 298, 487 A.2d 650 (1985).
"But," as we stated in Scheve, 44 Md. App. at 403, 408 A.2d 1071, "tax sale foreclosure proceedings are unique in many ways." Scheve, 44 Md. App. at 403, 408 A.2d 1071. In Scheve, we entertained an appeal from an order reinstating the right of redemption. When the finality of that order was challenged, we opined that the lower court's decision to revive the right of redemption "was the one and final act that adjudicated the rights of the parties and, save for appellate review, terminated the justiciable controversy among them." Scheve, 44 Md. App. at 404, 408 A.2d 1071. We hold, therefore, that the denial of appellants' § 14-845 request to reinstate their right of redemption is an appealable order. See Haskell v. Carey, 294 Md. 550, 451 A.2d 658 (1982); Arnold v. Carafides, 282 Md. 375, 384 A.2d 729 (1978).[5]
It follows, then, that the October 20 order was dispositive of appellants' defenses. Maryland Rule 2-311(f) provides:
A party desiring a hearing on a motion, other than a motion filed pursuant to Rule 2-532, 2-533, or 2-534, shall so request in the motion or response under the heading `Request for Hearing.' Except when a rule expressly provides for a hearing, the court shall determine in each case whether a hearing will be held, but it may not render a decision that is dispositive of a claim or defense without a hearing if one was requested as provided in this section.
To no avail, both parties requested a hearing on the motion to vacate. As a hearing was warranted, we must remand for further proceedings. See Arnold, 282 Md. at 384, 384 A.2d 729.
Within ten days of the October 20 order, the Panellas filed a Rule 2-534 motion to alter or amend.[6] This suspended the finality of the October 20 decision. Unnamed Attorney v. Attorney Grievance Commission, 303 Md. 473, 494 A.2d 940 (1985). Three days later, but within ten days of the order, appellants filed a motion for reconsideration.[7] Their motion would also have tolled the running of the time for appeal. Unnamed Attorney, 303 Md. at 486, 494 A.2d 940; Sieck v. Sieck, 66 Md. App. 37, 502 A.2d 528 (1986). Of course, its practical effect was nugatory.
Not until the December 16, 1988 resolution of both the motion to alter or amend[8] and the motion for reconsideration did the thirty day appeal time begin to run. At that point, an appeal from the December 16 amended judgment was noted. We, therefore, deny the Panellas' motion to dismiss the appeal.
Before continuing our discussion, we must make mention of two pages appended to the Panellas' brief. In support of their motion to dismiss, the Panellas attached a copy of the appellants' Rule 8-205 prehearing information report. Such conduct was an egregious breach of confidentiality and a blatant violation of Rule 8-206(d). We are inclined to award sanctions, but are unable to do so without a precise statement of the attorneys' fees incurred while responding to the motion to dismiss.
As we will remand for a hearing on the motion to vacate, we note that the lower court may reopen the judgment by means of its general revisory power. Md.Cts. & Jud.Proc.Code Ann. § 6-408; Maryland Rule 2-535. A finding under § 14-845 of the Tax-Property Article (fraud or lack of jurisdiction) is not required. Haskell v. Carey, 294 Md. at 558-560, 451 A.2d 658. In Haskell, the Court of Appeals construed Art. 81, § 113, the precursor to § 14-845 of the Tax-Prop. Article. Section 113 provided that a final order foreclosing the right of redemption could be reopened only "on the ground of lack of jurisdiction or fraud in the conduct of the proceedings to foreclose...." Similar language is contained in the current Tax-Prop. Article, § 14-845. A conflict appeared to exist between § 113 and the general revisory power set forth in § 6-408 of the Courts Article. Pursuant to § 6-408, the courts retained broad revisory power over a judgment for thirty days. The Court of Appeals gave full effect to both § 113 and § 6-408, however, by concluding that § 113 applied only to enrolled judgments, judgments after which thirty days had lapsed. Haskell, 294 Md. at 558-560, 451 A.2d 658. As the appellants in the present case moved to vacate the October 20 order within thirty days of its entry, the court retained discretionary power to revise the judgment.
Of course, constructive fraud, if timely alleged and sufficiently proven, will nonetheless warrant reopening of the judgment. Jannenga v. Johnson, 243 Md. 1, 5, 220 A.2d 89 (1966). Constructive fraud involves the breach of a legal or equitable duty. Neither dishonesty nor an actual intent to deceive are required. Scheve, 44 Md. App. 406, 408 A.2d 1071. Appellants contend that several acts or omissions by the Panellas constituted constructive fraud.
First, they argue that the affidavit delineating efforts to locate the appellants was defective both in form and substance. The Panellas' counsel filed the affidavit which purportedly recounts Mr. Panella's, not the affiant's, effort to locate appellants. Not until September 28, 1988, in response to appellants' motion to vacate was Mr. Panella's own affidavit filed. This subsequent affidavit was, however, untimely. The appellants further claim that merely checking area phonebooks was not an adequate attempt to discover their correct address. Arnold, 282 Md. 375, 384 A.2d 729. Appellants note that their current address appears on Worcester County Sanitary District records and Ocean City Water Department records. Appellants also state that, pursuant to recorded covenants, the property is subject to an annual maintenance fee collected by the Montego Bay Civic Association whose records bear appellants' current mailing address. These three sources, appellants claim, should have been examined during the title search required by Tax-Property Art., § 14-839(a)(1)(i) and would have provided the correct information.
Appellants also contend that the requisite mailing of the publication order was not accomplished. Tax-Property Art., § 14-839(a)(4). In turn, no affidavit certifying compliance with this requirement was filed. Tax-Property Art., § 14-839(a)(4). The sum of appellants' allegations, if proven to the satisfaction of the trial court, is sufficient to constitute constructive fraud. See Arnold, 282 Md. 375, 384 A.2d 729; Jannenga, 243 Md. 1, 220 A.2d 89. We reiterate, though, that constructive fraud is not a prerequisite for reopening the judgment. The court may instead choose to exercise its broad revisory power.
JUDGMENT VACATED; CASE REMANDED TO THE CIRCUIT COURT FOR WORCESTER COUNTY FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS OPINION.
COSTS TO BE PAID BY THE APPELLEES.
NOTES
[1] Appellants proffer the value of the property to be in excess of $60,000.
[2] Appellants attribute their omission to "an unfortunate miscommunication."
[3] By this time, two additional years of tax levies had accrued.
[4] With certain exceptions, we are authorized to hear appeals only from final judgments. Md.Cts. & Jud.Proc.Code Ann. § 12-301.
[5] This conclusion in no way limits the holding of Lowman v. Consolidated Rail Corp., 68 Md. App. 64, 74-77, 509 A.2d 1239, cert. denied, 307 Md. 406, 514 A.2d 24 (1986), or People's Counsel v. Advance Mobilehome Corp., 75 Md. App. 39, 540 A.2d 151, cert. denied, 313 Md. 30, 542 A.2d 857 (1988). Lowman is a multiple claim, automobile accident case in which the plaintiff sought reconsideration of an order grating summary judgment in favor of one defendant. Advance is a zoning appeal in which post judgment intervenors sought reconsideration, more than four months after the entry of judgment, of the trial court's earlier denial of a motion to revise. We again emphasize the unique nature of tax sales and distinguish Lowman and Advance on that basis.
[6] Interestingly, that motion refers to the October 20 decision as a "judgment."
[7] As ten days would have lapsed on a Sunday, the time was extended to Monday, October 31. Appellants filed their motion for reconsideration on October 31.
[8] The motion to alter or amend was granted without benefit of a hearing although a hearing was mandated by Rule 2-311(e). Appellants did not raise this issue, but we feel compelled to comment on it nonetheless. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543961/ | 55 B.R. 735 (1985)
AMALGAMATED INSURANCE FUND, Plaintiff,
v.
WILLIAM B. KESSLER, INC., Defendant.
No. 83 Civ. 4438.
United States District Court, S.D. New York.
November 25, 1985.
*736 Booth, Lipton & Lipton, New York City, for plaintiff.
Levin & Weintraub & Crames, New York City, for defendant.
OPINION
GRIESA, District Judge.
This is an appeal from a decision by Bankruptcy Judge Ryan, dated October 19, 1982, and the subsequent order of November 9, 1982, in which he held that a claim for "withdrawal liability" was not entitled to priority status as an administrative expense claim, but would be treated as a general unsecured claim. In re Kessler, 23 B.R. 722 (Bankr.S.D.N.Y.1982). The ruling is affirmed.
Following the submission of briefs on this appeal, it was agreed that an evidentiary hearing would be held. This hearing occurred on January 21, 1985. Thereafter, additional briefs were submitted.
Kessler, a clothing manufacturer, filed a Chapter 11 petition on November 21, 1980. Thereafter Kessler continued to operate its business as debtor in possession. Amalgamated Insurance Fund ("Amalgamated") is a multiemployer retirement and social insurance fund and is governed by the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended by the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. § 1001 et seq.
For many years Kessler had contributed, on behalf of its employees, to pension and insurance plans operated by Amalgamated.
In June 1981 certain transactions were carried out which had the effect of transferring assets of Kessler to Merchandising Corporation of New Jersey. Amalgamated entered into an agreement providing that it would not assert any claims against the assets to be transferred to Merchandising Corporation. However, the agreement confirmed the right of Amalgamated to file and prove a claim in the Chapter 11 proceeding of Kessler. It was specified that the claim would be entitled "To priority, if any, in accordance with the normal rules of the Bankruptcy Code."
In July 1981 Kessler discharged its employees, and ceased operations. At this *737 time Kessler ceased making its regular contributions to Amalgamated.
Amalgamated filed three claims in the Chapter 11 proceeding. The third one, filed on December 23, 1981, is the only one presently at issue. The December 1981 claim was for two items: (1) unpaid contributions in the amount of $17,613.38, and (2) "withdrawal liability" in the amount of $4,347,640.19. In its claim, Amalgamated asserted that both items were administrative expenses entitled to priority status. On February 9, 1982 Kessler filed a response to Amalgamated's claim. Kessler had no objection to conferring priority status on the unpaid contribution item of $17,613.38. This related to contributions which came due during the Chapter 11 proceeding. However, Kessler took the position that the withdrawal liability should be reclassified as a general unsecured claim.
Bankruptcy Judge Edward J. Ryan held a hearing on April 23, 1982. He issued his decision on October 19, 1982 and an order on November 9, 1982. Judge Ryan's ruling was that the claim for withdrawal liability was to be reclassified as a general unsecured claim.
Amalgamated appeals to the District Court from this ruling.
Facts
Withdrawal Liability
Prior to the enactment of ERISA in 1974, certain problems developed with respect to employee pension plans. One of them was that the plans were providing for large amounts of future benefits which were not being fully funded. Commonly the pension plans were based on contributions by employers, and it was frequently the case that the contributions would only cover the current benefits of retirees.
ERISA, enacted in 1974, establishes the basic policy that employee pension plans should provide vested benefits to the employees. ERISA further requires employee pension plans to meet minimum standards of funding. 29 U.S.C. § 1001(c). Past accumulations of unfunded vested liabilities must be brought up to date. The statute permits this to be done over time. In the case of Amalgamated, the law allows the funding of its pre-ERISA vested liabilities over a period of 40 years beginning in 1976. See 29 U.S.C. § 1082(b)(2)(B)(i).
The funding requirement just described relates to unfunded vested liability which accumulated before ERISA. However, even after ERISA, unfunded vested liability relating to past service by employees could increase. This would occur when a pension fund increased the level of benefits. Such an increase in effect "relates back." It raises the level of benefits for those who earned their benefits before the time of the increase sometimes many years before as well as for those who are earning their benefits currently. In the case of Amalgamated, there have been certain increases in the level of benefits since the enactment of ERISA. The law allows these benefit increases to be funded over a period of 10 years for pensioners and surviving beneficiaries, and 25 years for vested plan participants. 29 U.S.C. § 1423(d)(1)(B)(ii).
When a contributing employer withdraws from a group pension plan, this creates a problem regarding that employer's share of any unfunded vested liabilities. Prior to MPPAA such an employer was under no obligation to pay his share of the unfunded vested liability. MPPAA establishes the concept of "withdrawal liability." The statute imposes upon the withdrawing employer a liability for his share of the total unfunded vested liability of the pension plan to which he has been contributing. 29 U.S.C. §§ 1381 and 1383(a). This share is fixed according to one of several methods provided in the statute. 29 U.S.C. § 1391.
Kessler and Amalgamated
Kessler was a manufacturer of men's and boys' clothing. It joined the Clothing Manufacturers Association ("CMA") in 1939. Over the years CMA entered into collective bargaining agreements with the Amalgamated Clothing Workers of America. Since 1942 CMA members have contributed to the Amalgamated pension plan *738 to provide benefits to the employees of the various CMA members. The contributions take the form of a fixed percentage of payroll. The percentage at any given time is specified in the applicable collective bargaining agreement. Kessler began contributing to Amalgamated in 1945.
Prior to ERISA, Amalgamated collected enough contributions from the participating employers to pay benefits to current retirees, but future benefits went unfunded. Moreover, prior to MPPAA, when a contributing employer went out of business or otherwise withdrew, Amalgamated had no procedure under which the withdrawing employer would pay his share of the unfunded vested liability. This share fell upon the remaining participating employers.
It should be noted that for many years the clothing industry in the United States has been declining. The number of workers has plummeted, while the number of retirees has grown substantially. In 1955 there were 108,000 active employees of CMA members and 13,000 retired employees receiving benefits. As of 1984 there were only 48,000 active employees and 40,000 retirees. Thus, over a long period of time, the employee base, on which contributions to the retirement fund have been assessed, has been declining. The number of employers contributing to the fund has also been declining. As of the time MPPAA was enacted, an employer participating in the Amalgamated fund was shouldering not only the unfunded vested liability which might be said to be attributable to his own employees, but also a share of such liabilities which were attributable to employees of companies which had gone out of business.
At the time MPPAA came into effect, Amalgamated had a very large unfunded vested liability. As of December 31, 1979, the figure was $441 million. On December 31, 1980 the figure was somewhat lower $425 million.
Kessler's withdrawal liability was calculated as of December 31, 1980. This liability is Kessler's share, as of that date, of the total unfunded vested liability of Amalgamated. The amount is calculated under a formula which compares Kessler's contributions with the total contributions to the fund over the previous several years. See 29 U.S.C. § 1391(b)(3). The amount resulting from this calculation is $4,347,640. In the absence of bankruptcy Kessler would have 20 years to satisfy this obligation.
Kessler did not literally become liable for the withdrawal liability until it ceased operations in July 1981, during the pendency of the Chapter 11 proceeding. However, it is important to keep in mind that Kessler's withdrawal liability is merely its share of the total unfunded vested liability of Amalgamated. Thus, it is relevant to consider the question of when the unfunded vested liability of Amalgamated accrued. Specifically, what was the time of accrual of the $425 million unfunded vested liability of Amalgamated, which existed as of December 31, 1980? The answer is that the great bulk of this liability accrued over a period of decades prior to the enactment of ERISA. It is conceded that the entire amount of the $425 million accrued before the filing of the Kessler Chapter 11 petition on November 21, 1980. There is no contention that any amount of this liability accrued between that date and the calculation date December 31, 1980.
It is also important to note, in line with the earlier discussion, that Kessler's withdrawal liability relates not only to unfunded vested liabilities attributable to its own employees, but also to what is attributable to the employees of other companies which have gone out of business.
Discussion
Section 507(a)(1) of the Bankruptcy Reform Act of 1978, 11 U.S.C. § 507(a)(1), grants a first priority in distribution to claims which are allowed as expenses of administration under § 503. Section 503(b)(1)(A), 11 U.S.C. § 503(b)(1)(A), allows as administrative expenses "the actual, *739 necessary costs and expenses of preserving the estate, including wages, salaries, or commissions for services rendered after the commencement of the case."
There appears to be no judicial holding directly in point i.e., dealing with the question of whether withdrawal liability is an administrative expense in a bankruptcy proceeding. However, the general rules governing administrative expenses are well established.
In a Chapter 11 proceeding, where the debtor remains in business, administrative expenses include the costs of carrying on the debtor's business after the commencement of the proceeding. 3 Collier on Bankruptcy, ¶ 503.04[1][a][i] (15th ed. 1985). They relate to activities during the proceeding, not to claims and debts which accrued prior thereto. See In re Meyer's Inc., 15 B.R. 390, 392 (Bankr.S.D.Cal.1981). Usually administrative expenses involve payments for goods and services obtained by the debtor. Administrative expenses also include legally imposed costs, such as tort liability arising during the bankruptcy proceeding, Reading Co. v. Brown, 391 U.S. 471, 88 S. Ct. 1759, 20 L. Ed. 2d 751 (1968), and the cost of legally required labor negotiation. Yorke v. NLRB, 709 F.2d 1138, 1143 (7th Cir.1983).
Compensation to employees for services rendered during the bankruptcy proceeding is an administrative expense. It is conceded that this includes indirect compensation consisting of payments to a pension fund for the benefit of employees.
Generally, debts which accrue prior to the bankruptcy proceeding are not administrative expenses, even if they are not payable until some date during the proceeding. Thus, where a certain amount of vacation pay accrues to employees prior to the bankruptcy proceeding, and then an additional amount accrues during the proceeding, only the latter portion will be considered an administrative expense. Straus-Duparquet, Inc. v. Local 3, International Brotherhood of Electrical Workers, 386 F.2d 649 (2d Cir.1967).
Severance pay for employees terminated during the bankruptcy proceeding has been held by the Second Circuit to constitute an administrative expense. In re W.T. Grant Co., 620 F.2d 319 (2d Cir.), cert. denied, 446 U.S. 983, 100 S. Ct. 2963, 64 L. Ed. 2d 839 (1980); Straus-Duparquet, supra. This is true, despite the fact that the amount of severance pay is typically tied to the length of service, and therefore may be based in part on service occurring before the commencement of the proceeding. This Circuit distinguishes severance pay from vacation pay on the question of bankruptcy claim classification. The Circuit reasons that vacation pay is earned from day to day and accrues as it is earned. On the other hand, severance pay, although calculated on the basis of length of service, is not earned until the time of termination. Where the termination occurs during the bankruptcy proceeding, the termination pay is a cost of business activity occurring during that proceeding, and so is an administrative expense. W.T. Grant Co., supra; Straus-Duparquet, supra. Other circuits have held to the contrary. In re Mammoth Mart, Inc., 536 F.2d 950 (1st Cir.1976); In re Public Ledger, 161 F.2d 762, 771-73 (3d Cir.1947).
In applying these rules and authorities to the present case, Amalgamated argues that the withdrawal liability of Kessler was a cost of terminating Kessler's employees during the Chapter 11 proceeding, analogizing withdrawal liability to severance pay, and relying on Straus-Duparquet. Amalgamated argues that the withdrawal liability of Kessler did not accrue until the termination of the employees, and that therefore this indebtedness arose during the time of the Chapter 11 proceeding and not before. Kessler, on the other hand, argues that the withdrawal liability accrued over a long period of time prior to the Chapter 11 proceeding, and cannot therefore be considered an administrative expense.
*740 The court holds that the withdrawal liability of Kessler is not an administrative expense. This liability is Kessler's pro rata share of Amalgamated's unfunded vested liability as of the calculation date December 31, 1980. By virtue of their promises of pension benefits over a period of decades, payable through the instrumentality of Amalgamated, the participating CMA employers accumulated a liability for unfunded benefits. As of the late 1970's this was over $400 million. This liability grew up over a long term of years, and, under ERISA, a long-term payout is permitted 40 years commencing in 1976. As explained above, withdrawal liability is merely a substitute for the continuing contributions a withdrawing employer would otherwise make toward fully funding vested benefits. Kessler's liability for its share of Amalgamated's unfunded vested benefits existed long before the start of the Chapter 11 proceeding. Thus, withdrawal liability is not a cost of business activity occurring during the Chapter 11 proceeding.
Withdrawal liability is not analogous to the severance pay in Straus-Duparquet, as is so strongly argued by Amalgamated. Severance pay is "compensation for termination of employment." Straus-Duparquet, 386 F.2d at 651. When termination occurs during the bankruptcy proceeding, claims for severance pay are entitled to administrative expense status because severance pay is compensation for losses terminated employers will bear after the bankruptcy proceeding commenced. Withdrawal liability, on the other hand, is imposed on employers withdrawing from multiemployer pension plans to make up for past failures by employers to fund fully pension plan benefits. Essentially, withdrawal liability is belated compensation for services provided before the start of bankruptcy proceeding. As such, a claim for withdrawal liability is not entitled to administrative expense status.
The decision of the bankruptcy court is affirmed.
So ordered. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543915/ | 55 B.R. 53 (1985)
In re FOREIGN CRATING, INC., Debtor.
Bankruptcy No. 884-41713-20.
United States Bankruptcy Court, E.D. New York, Westbury Division.
July 22, 1985.
Seyfarth, Shaw, Fairweather & Geraldson, New York City, for Hyster Credit Corp.
Wasserman, Chinitz, Geffner, Green & Wolf, Jericho, N.Y., for debtor.
*54 ROBERT JOHN HALL, Bankruptcy Judge.
The matter of debtors' motion to assume an unexpired lease with Hyster Credit Corporation ("Hyster") for a fork-lift truck came to be heard on the 13th day of June, 1985. The attorneys for the parties stated that an out-of-court agreement had been made to allow debtor to assume the lease, but, Hyster's right to attorneys' fees for this matter remained in dispute. Upon consideration of the memoranda submitted, oral argument, and other supporting submissions, the court finds that Hyster is entitled to attorneys' fees in the amount of $1210.00.
FACTS
There are few facts to consider. Debtor entered into a six-year lease with Hyster on March 31, 1983. On November 7, 1984, when debtor was several months in default on rental payments, debtor filed its bankruptcy petition. Hyster received one post-petition rental payment and on March 23, 1985, Hyster filed a motion to compel debtor to assume or reject the lease. The court granted Hyster's motion, and subsequently debtor filed the instant motion to assume the lease. Hyster demands attorneys' fees for the preparation of its motion to compel debtor to assume or reject the lease and for its answer to the instant motion, pursuant to a lease provision that provides for attorneys' fees for "any suit or action as a result of lessee's default. . . ."
DISCUSSION
The issue before the court is whether a debtor-lessee must cover his landlord's fees for the landlord's motion to compel assumption or rejection of an unexpired lease and related litigation. In the circumstances herein, the court holds that such attorneys fees constitute a pecuniary loss resulting from debtors default pursuant to 11 U.S.C. § 365(b)(1)(B), and such fees must be recompensed by the debtor before it may assume its lease.
11 U.S.C. § 365(b)(1) sets forth three conditions debtors must satisfy to assume an unexpired lease. A debtor must:
(A) cure or provide adequate assurance that he will cure defaults;
(B) compensate or provide adequate assurance that he will compensate the other party for any pecuniary loss resulting from such default; and
(C) provide adequate assurance of future performance under the contact or lease.
Upon debtor's post petition defaults and its failure to assume or reject the lease within sixty days, there was little Hyster could do to secure its due and owing rental payments. Given debtor's purported willingness to assume the lease, Hyster's best strategy to recover back rent was to institute a legal proceeding to compel assumption of the lease and thereby receive a cure for defaults pursuant to 11 U.S.C. § 365(b)(1)(A). Thus, debtor's defaults resulted in Hyster's pecuniary loss of attorneys fees for initiating a legal proceeding to compel rejection or assumption of the lease. Accordingly, the loss is compensable pursuant to 11 U.S.C. § 365(b)(1)(B). In re Bullock, 17 B.R. 438, Bankr.L.Rep. (C.C.H.) ¶ 68,642 (Bkrtcy.App.Cal.1982.)
In his sworn affidavit, Hyster's attorney stated that attorney's fees incurred totaled $1210.00. Hyster's attorney submitted unsworn post-hearing supporting documents which indicate that the $1210.00 figure is actually a significant underestimation.
The court believes that $1210.00 is a reasonable fee and directs debtor to pay $1210.00 to Hyster within fifteen days of the date on which the court signs an order embodying this decision, or the lease shall be deemed rejected and Hyster shall be entitled to immediate possession of the fork-lift without further order of this court. The parties shall settle an order in accordance herewith. Said order shall, additionally, incorporate the out-of-court agreement of the parties relating to the assumption of the lease.
SETTLE ORDER. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543916/ | 53 F.2d 425 (1931)
UNITED STATES
v.
CATZ AMERICAN CO., Inc.
No. 6498.
Circuit Court of Appeals, Ninth Circuit.
November 2, 1931.
Rehearing Denied December 7, 1931.
Geo. J. Hatfield, U. S. Atty., and William A. O'Brien, Asst. U. S. Atty., both of San Francisco, Cal., for appellant.
Norman A. Eisner, of San Francisco, Cal., for appellee.
Before WILBUR and SAWTELLE, Circuit Judges, and JAMES, District Judge.
JAMES, District Judge.
Appellant brought its libel in the District Court seeking a decree condemning approximately 2,000 sacks of "Cull" dried figs which were found at the dock in San Francisco ready to be loaded aboard ship, with initial destination Trieste, Italy. It was charged in the libel that the shipment consisted partly of "filthy, decomposed or putrid vegetable matter," and was subject to seizure under the Food and Drugs Act.
The answer of appellee admitted that the figs were "culls," and that without further segregation or processing they were not fit to be used as food. It was further alleged in the answer that the figs had actually been placed in transit, consigned to a buyer in Austria.
Trial was had, and there was no conflict in the evidence as to matters material to the issues. In brief, appellee, a dealer in dried figs, had prepared the fruit to meet an order for that particular kind and quality of figs; the order being received from an Austrian manufacturer who processed like fruit to make a coffee flavoring. The figs were wormy in part. Appellee had made shipments of many tons of the same kind of figs to the same buyer during the preceding four years. The District Court found that the facts, under the law appealed to, did not show a cause for the decree demanded. This decision, we believe, was right.
The Food and Drugs Act (21 USCA §§ 1-25) contains many provisions respecting adulteration and misbranding of articles of food and drugs, and the shipment of the same in interstate commerce. Section 2 forbids the introduction into any state or territory from another state or territory, or from a foreign country, or the shipment to a foreign country, of any article of food or drugs adulterated or misbranded within the meaning of the law. This section provides that the offender shall be guilty of a misdemeanor and subject to a fine for the first offense and fine or imprisonment, or both, for a subsequent offense. The concluding portion of the section reads as follows: "No article shall be deemed misbranded or adulterated within the *426 provisions of said sections when intended for export to any foreign country and prepared or packed according to the specifications or directions of the foreign purchaser when no substance is used in the preparation or packing thereof in conflict with the laws of the foreign country to which said article is intended to be shipped; but if said article shall be in fact sold or offered for sale for domestic use or consumption, then this proviso shall not exempt said article from the operation of any of the other provisions of the sections hereinbefore enumerated."
Section 8 provides that: "For the purposes of sections 1 to 15, inclusive, of this title, an article shall be deemed to be adulterated: * * * Sixth. If it consists in whole or in part of a filthy, decomposed, or putrid animal or vegetable substance. * * *"
Section 8, in the part quoted, furnishes the definition of an "adulterated" article of food. The exception is, as is specified in that portion of section 2 quoted, that articles of food shall not be deemed "adulterated" when intended for export to a foreign country, and prepared or packed according to directions of the foreign purchaser, and where no substance is used in the preparation or packing which is in conflict with the laws of the country to which the article is intended to be shipped. Construed together, these provisions seem intended to allow the shipment to a foreign country of products which are not up to the requirements imposed upon interstate shipments where the foreign purchaser has ordered the precise kind and quality which the exporter designs to send to him, so long as the law of the country to which they are being sent does not impose similar restrictions as to substances "used in the preparation or packing thereof." The words "prepared or packed" should be held to mean any condition or grade of the merchandise, including any deteriorated state of the goods, considering the class to which they belong. The law thus interpreted (and we feel that the language used is fairly expressive to the intent indicated), the libel did not show that the merchandise seized was subject to forfeiture.
The certificate introduced by appellant in the trial court, showing the provisions of an Austrian law as prohibiting certain impure materials being used in coffee admixtures and coffee substitutes, could not have the effect to put the shipper here out of the excepted class, as showing that he had used a substance in the preparation and packing of the fruit "in conflict with the laws of the foreign country to which said article is intended to be shipped." Section 2 above cited. The manufacturer, upon receiving the figs, might well free them from all the deleterious matter before converting them into coffee flavoring, or he might divert them to other proper uses if they were unfit for such purpose. In the absence of evidence to the contrary, it will be assumed that he will comply with the law of Austria.
The decree is affirmed.
SAWTELLE, Circuit Judge (dissenting).
I am unable to agree with the majority in the view that the saving provision of section 2 of the Food and Drugs Act protects from seizure shipments of decayed food in its "natural condition," to use the expression reiterated by the appellee. The saving provision relates solely to articles "prepared or packed" according to the directions of the foreign purchaser; it does not authorize shipment of food inherently "adulterated" by being, according to section 8, "filthy, decomposed, or putrid." That section defines the word "adulterated" as follows:
"For the purposes of sections 1 to 15, inclusive, of this title, an article shall be deemed to be adulterated; * * *
"Sixth. If it consists in whole or in part of a filthy, decomposed, or putrid animal or vegetable substance, or any portion of an animal unfit for food, whether manufactured or not, or if it is the product of a diseased animal, or one that has died otherwise than by slaughter."
The government is not quarreling with the method either of "packing" or "preparing" the figs; it is censuring a vice that inheres in the food itself, regardless of its "packing" or "preparation"; namely, its essential putridity.
The word "prepare" implies the intervention of human agency. It does not mean the mere permission that nature takes its course. Shipping rotten figs in their "natural condition" is not "preparing" or "packing" them.
The test seems to be: Did the "preparing" or the "packing," of itself, cause the condition to which the government is objecting?
In other words, did the "preparing" or the "packing" of the fruit result in its adulteration or decay? We are assuming, for the sake of the argument only, that such preparing *427 and packing were done according to the instructions of the foreign purchaser.
If it should be found that the putrid condition of the figs was due to the method used in packing or preparing them, the saving provision referred to above applies, and the shipment is not subject to condemnation.
If, on the other hand, it is ascertained that the fruit was "adulterated" because of natural decay in which the hand of man had no part then the vice complained of may be said to be inherent, and to render the shipment subject to seizure by the government.
In Thomas and Wife v. Winchester, cited by the appellee itself, 6 N.Y. 397, 411, 57 Am. Dec. 455, the court thus defined "prepared": "The word `prepared' on the label, must be understood to mean that the article was manufactured by him, or that it had passed through some process under his hands, which would give him personal knowledge of its true name and quality."
It may well be asked here, What "process" was used by the appellee to cause the figs to become decayed? The answer is found in the appellant's own statement, that the fruit was shipped in its "natural condition." Therefore there was no "preparation" on appellee's part.
Whatever might be the government's action against the shipper, its suit here is against the shipment; and in such a case the construction is strict as against the shipment: "The rule of strict construction [in favor of the allegedly offending shipper] invoked by the defendant in error has little or no application to statutes designed to promote the public health or public safety." A. O. Andersen & Co. v. United States (C. C. A. 9) 284 F. 542, 543.
Finally, the record shows that the law of Austria does "impose similar restrictions as to substances `used in the preparation and packing'" of "products which are not up to the requirements imposed upon interstate shipments," even if the foreign consignee "has ordered the precise kind and quality which the exporter designs to send to him": "Other ground coffee admixtures and coffee substitutes. These products must contain no coarse fragments, coming from stems or cores and the like of the products used for this purpose, and must be free from molds, insects, and their maggots." Official Compilation of the Regulations of the Republic of Austria on Alimentary Foods, published by the Austrian Federal Ministry of Social Administration, Public Health Office, in Vienna.
The majority of the court seeks to answer this objection, at the conclusion of its opinion, by assuming that the "manufacturer, upon receiving the figs, might well free them from all the deleterious matter before converting them into coffee flavoring, or he might divert them to other proper uses if they were unfit for such purpose."
I do not think that the jurisprudence under the statute authorizes such an assumption. It is true that the cases that I am about to cite deal with interstate and not foreign shipments; but, since it is admitted that this is a case of first impression, the reasoning in those cases can properly, by analogy, be extended to the case at bar.
We are here concerned with the condition of the shipment as it leaves our shores, and not with what may be done to the merchandise after it has arrived at its foreign destination.
In United States v. Thirteen Crates of Frozen Eggs (C. C. A. 2) 215 F. 584, 585, the court said: "The question of intent of either the shipper or the consignee has nothing to do with the question."
In the lower court, in that case, the "intent" of both the shipper and the consignee was clearly shown, but such intent did not prevent the condemnation of the shipment: "Eggs in this condition may be sold and used as an article of food, or for tanning purposes (that is, for use in the tanning of leather), and claimant had sold eggs of this description, selected and segregated at the same time as these, to a tannery or tanning firm located and doing business at a point not far distant from Chicago for tanning purposes. It had not shipped or sold any of its eggs of this description to be used and consumed as an article of food and did not contemplate doing so." 208 F.(2d) 950, 951.
As was said by the District Judge in that case, "the purpose of Congress was to prohibit the transportation of articles in interstate commerce which come within the definition given in the statute and make them subject to seizure and condemnation if so transported." See, also, United States v. Two Barrels of Desiccated Eggs (D. C.) 185 F. 302; Union Dairy Co. v. United States (C. C. A. 7) 250 F. 231, 233; United States v. Ninety-four Dozen, More or Less, Half-Gallon Bottles Capon Springs Water (D. C.) 48 F.(2d) 378, 379, 381.
In Hipolite Egg Co. v. United States, 220 U.S. 45, 52, 55, 31 S. Ct. 364, 55 L. *428 Ed. 364, the Supreme Court branded as "untenable" the egg company's contention that "section 10 of the food and drugs act [21 USCA § 14] does not apply to an article of food which has not been shipped for sale, but which has been shipped solely for use as raw material in the manufacture of some other product."
"The object of the law," the court said, "is to keep adulterated articles out of the channels of interstate commerce, or, if they enter such commerce, to condemn them while being transported or when they have reached their destination, provided they remain unloaded, unsold, or in original unbroken packages."
On page 58 of the opinion in 220 U. S., 31 S. Ct. 364, 367, the Supreme Court brands articles debased by adulteration as being "outlaws of commerce."
This apt characterization fits a shipment of wormy figs, and the fact that such shipment is destined for a foreign port does not divest it of its outlaw nature.
Accordingly, I am of the opinion that the decree should be reversed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919562/ | 660 So. 2d 227 (1993)
Kelvin Loyce PARISH
v.
STATE.
CR-90-1285.
Court of Criminal Appeals of Alabama.
April 23, 1993.
Thomas Brantley of Parkman & Brantley, Dothan, for appellant.
James H. Evans, Atty. Gen., and Gilda Branch Williams, Asst. Atty. Gen., for appellee.
ON SECOND APPLICATION FOR REHEARING
PATTERSON, Presiding Judge.
On September 30, 1992, this court withdrew its opinion of December 27, 1991, and substituted another therefor. This court now withdraws its opinion of September 30, 1992, and substitutes the following therefor:
The appellant, Kelvin Loyce Parish, pleaded guilty to unlawful distribution of a controlled substance, in violation of § 13A-12-211, Code of Alabama 1975, and was sentenced to 10 years' imprisonment, that sentence including 5 years' enhancement pursuant to § 13A-12-250,[1] because the offense occurred within three miles of a school. He raises three issues on appeal.
We must reverse the trial court's judgment because the trial court failed to correctly inform the appellant of the minimum and maximum possible sentences.
The relevant portion of the plea colloquy reads as follows:
"THE COURT: Have you had explained to you the rights which you will give up by entering a plea of guilty and the range of punishment [5 to 20 years' imprisonment] as set out on the explanation of rights form?
"THE DEFENDANT: Yes.
*228 "THE COURT: Let me make one change on the formit says not less than five years, but it will be not less than
"MR. BRANTLEY [defense counsel]: I put five because of the mandatory five.
"THE COURT: Do you understand that theClass B felony and the range of punishment in this case is normally from two years to twenty years, but due to the fact that the offense occurred within three miles of a school, that the minimum sentence is three years and the maximum is twenty years, do you understand that?
"THE DEFENDANT: Yes, sir.
"THE COURT: And do you
"MR. BRANTLEY: The minimum sentence is five years.
"THE COURT: You are correct, the minimum sentence is five years and the maximum is twenty years, but it is a Class B felony and I have changed that on that form.
"MR. BRANTLEY: Yes, sir.
"THE COURT: Backing up, do you understand that the range of punishment is from five years to twenty years in this case because of theit's called the three-mile rule.
"THE DEFENDANT: Yes, sir."
The appellant was indicted for unlawful distribution of a controlled substance, a Class B felony, which has a sentence range of imprisonment for a minimum of 2 years and a maximum of 20 years. See §§ 13A-12-211 and 13A-5-6(a)(2). Because the sale occurred within three miles of a school, the appellant's sentence must be enhanced by an additional five years' imprisonment. See § 13A-12-250. Therefore, the correct sentence range of which the appellant should have been advised was a minimum of 7 years' and a maximum of 25 years' imprisonment, and not a minimum of 5 years' and a maximum of 20 years' imprisonment as he was advised. See Dixon v. State, 572 So. 2d 512, 513 (Ala.Cr.App.1990) (the legislature intended that the five-year sentence mandated by § 13A-12-250 be "added to" the existing sentence).[2]
On original submission, we applied Willis v. State, 500 So. 2d 1324 (Ala.Cr.App. 1986), and held that our review of this argument was procedurally barred because the appellant failed to object on this ground at the guilty plea proceeding, in a motion for a new trial, or in a motion to withdraw his guilty plea. See Johnson v. State, 480 So. 2d 14 (Ala.Cr.App.1985). See also A.R.Cr.P. 14.4(e) (specifically allowing for withdrawal of a guilty plea). The rationale of Willis can be summarized as follows: "It is for the trial court, which accepted the plea, to consider and correct, in the first instance, any error which may have been committed or any deficiency in the proceedings," 500 So. 2d at 1324. For a discussion of this rationale, see id. at 1324-25.
This court has frequently cited both Willis and pre-Willis cases as authority for refusing to review an issue contesting the validity of a guilty plea where that issue was not presented to the trial court. See, e.g., Roberts v. State, 605 So. 2d 1252 (Ala.Cr.App.1992) (issues that the appellant's plea had not been intelligently or voluntarily made and that the trial court had no factual basis for acceptance of the plea were not preserved); Moon v. State, 580 So. 2d 87 (Ala.Cr.App.), cert. denied, 580 So. 2d 87 (Ala.1991) (issue regarding allegedly illegal plea agreement not preserved); Ford v. State, 573 So. 2d 797, 798 (Ala.Cr.App.1990) ("[a] defendant's failure to present to the trial court any alleged erroneous information concerning the range of punishment precludes that defendant from challenging his guilty plea on that basis on appeal"); Bennefield v. State, 552 So. 2d 188 (Ala.Cr.App.1989) (issue concerning court's failure to inform defendant of range of sentence precluded); Bowen v. State, 536 So. 2d 168 (Ala.Cr.App.), cert. denied, 536 So. 2d 168 (Ala.1988) (challenge of plea on appeal precluded); Phillips v. State, 518 So. 2d 833 (Ala. Cr.App.1987), cert. denied, 518 So. 2d 833 (Ala.1988) (appellant is precluded from challenging guilty plea on appeal on ground that *229 he was not informed of the proper minimum sentence where he had failed to present the claimed error to trial court in timely manner); Benefield v. State, 513 So. 2d 107 (Ala. Cr.App.1987) (issue regarding misinformation of sentence range precluded); Johnson v. State (issues regarding correct knowledge of sentence range and of critical elements of charges not properly preserved); and McCoy v. State, 392 So. 2d 1287 (Ala.Cr.App.1981) (issue that pleas were involuntary because of the defendant's erroneous belief about sentencing not preserved). See also Looney v. State, 563 So. 2d 3 (Ala.Cr.App.1989), cert. denied, 563 So. 2d 3 (Ala.1990) (court, after finding issue properly preserved as required by Willis, reversed where defendant was not advised of the correct minimum sentence).
However, the Alabama Supreme Court in Ex parte Rivers, 597 So. 2d 1308 (Ala.1991), in effect, announced a different rule regarding preservation of the issue of whether the appellant had been properly advised of the applicable sentence range before pleading guilty. In that case, the appellant, contesting the validity of his guilty pleas in an A.R.Cr.P.Temp. 20 petition, alleged, in part, that "he [had not been] properly informed of the maximum and minimum sentences so as to allow his plea to be knowingly and voluntarily given," id. at 1309.[3] In an unpublished memorandum, we had held that our review of this issue was procedurally barred. 586 So. 2d 307. After reiterating that "a defendant must be informed of the maximum and minimum possible sentences as an absolute constitutional prerequisite to the acceptance of a guilty plea," 597 So. 2d at 1309, the Rivers court characterized the remaining issue as follows: "The State contends, and the Court of Criminal Appeals agreed, that Rivers failed to preserve the issue of ... the illegality of his sentencing for appeal by failing to raise it at trial," id. at 1310 (emphasis added). The court, in disagreeing with our holding, relied on the following language in Ex parte Brannon, 547 So. 2d 68, 68 (Ala. 1989)[4]:
"[W]hen a sentence is clearly illegal or is clearly not authorized by statute, the defendant does not need to object at the trial level in order to preserve that issue for appellate review. See Bartone v. United States, 375 U.S. 52 [84 S. Ct. 21, 11 L. Ed. 2d 11] ... (1963). Indeed, the illegality of a defendant's sentence is a ground specified in Rule 20, Ala.R.Crim.P. [Temp.], for a collateral post-conviction remedy."
Finding that the issue was not precluded, the court remanded the case with the instruction that Rivers's convictions be reversed, holding that "[b]ecause Rivers was not informed of the minimum possible sentence in his cases, prior to his plea of guilty, his guilty plea was not knowingly, voluntarily, and intelligently given," 597 So. 2d at 1310.
Apparently, the Rivers court considered that the trial court's failure to correctly advise Rivers of the minimum possible sentences resulted in the trial court's lack of jurisdiction.[5] This appears to be a departure *230 from case law. As far as we are aware, a lack of information or misinformation about the sentencing consequences of pleading guilty has always been treated in the context of the voluntariness of the pleanot in the context of jurisdiction. See, e.g., Carter v. State, 291 Ala. 83, 84, 277 So. 2d 896, 897 (1973) (court stated that "[o]ur inquiry focuses upon whether the appellant's guilty plea was `intelligent and voluntary,' as required by Boykin v. Alabama, 395 U.S. 238 [89 S. Ct. 1709, 23 L. Ed. 2d 274] ... (1969) [, where the a]ppellant argues that he was not advised on the record what the minimum and maximum punishments for his offense would be").
We note that in situations similar to the one before uswhere, in the trial court's colloquy with the defendant and in the explanation of rights form, the appellant was given sentencing misinformationwe have not automatically ordered that the judgment of conviction based upon the appellant's guilty plea be reversed, as the Rivers court instructed, rather, we have remanded the case for an evidentiary hearing.
"[W]here the defendant is given sentencing misinformation, the mere fact that he was given such misinformation
"`"does not end the matter. `The standard was and remains whether the plea represents a voluntary and intelligent choice among the alternative courses of action open to the defendant.' North Carolina v. Alford, 400 U.S. 25, 31 [91 S. Ct. 160, 164, 27 L. Ed. 2d 162] ... (1970). The dispositive issue ... is whether [the defendant] would have or would not have pleaded guilty had he been given the correct [information]. See Pitts v. United States, 763 F.2d 197, 201 (6th Cir.1985); Williams v. Smith, 591 F.2d 169 (1979)."'
"Jackson v. State, 565 So. 2d 669, 671 (Ala. Cr.App.1990) (quoting Holman v. Jones, No. CV-87-A-2163-S (N.D.Ala., Nov. 16, 1988)) (emphasis added [in Lochli]). See also Williams v. Smith, 591 F.2d 169, 172 (2d Cir.), cert. denied, 442 U.S. 920 [99 S. Ct. 2845, 61 L. Ed. 2d 289] ... (1979) (`the test ... for determining the constitutional validity of a state court guilty plea where the defendant has been given sentencing misinformation is whether the defendant was aware of actual sentencing possibilities, and, if not, whether accurate information would have made any difference in his decision to enter a plea')."
Lochli v. State, 565 So. 2d 294, 297 (Ala.Cr. App.1990). See also Trice v. State, 601 So. 2d 180 (Ala.Cr.App.1992); Brooks v. State, 606 So. 2d 615 (Ala.Cr.App.1991); Ford v. State, 573 So.2d at 798 ("[t]he reason for [the Willis rule] is because the test for determining the constitutional validity of a guilty plea where the defendant has been given sentencing misinformation and is unaware of the actual sentencing possibilities is whether the accurate information would have made any difference in his decision to enter a plea"). See also Gilliland v. State, 591 So. 2d 151 (Ala.Cr. App.1991) (in finding on direct appeal that defendant had been given erroneous information about his eligibility for parole, court remanded for a hearing on appellant's motion to withdraw his guilty plea to determine whether his plea was induced by the erroneous information); Jackson v. State, 565 So. 2d 669 (Ala.Cr.App.1990).
However, in reliance on Rivers, we hold that the appellant's issue regarding sentencing misinformation is properly before this court, despite the appellant's failure to object at the plea proceeding, to move for a new trial, or to move to withdraw his guilty plea. Therefore, we hold that, because the appellant was not correctly informed of the minimum and maximum possible sentences, his sentence was void, although it fell within the correct permissible range of sentence, and, in accordance with Rivers, we reverse his conviction. (We see no need to determine whether the present error warrants reversal under A.R.Cr.P. 14.4, see generally, 2 W. LaFave and J. Israel, Criminal Procedure § 20.5(c) (1984), because this error clearly warrants reversal under Rivers.)
Based on the foregoing, the judgment of the circuit court is reversed, and this case is remanded for proceedings consistent with this opinion.
*231 APPLICATION FOR REHEARING GRANTED; RULE 39(k) MOTION DENIED; OPINION OF SEPTEMBER 30, 1992, WITHDRAWN; OPINION SUBSTITUTED; REVERSED AND REMANDED.
All Judges concur.
NOTES
[1] The record originally reflected that the appellant was sentenced to 10 years' imprisonment, but it did not reflect whether the sentence included the required enhancement. This court, pursuant to A.R.App.P. 10(g), ordered the trial court to indicate whether the appellant's sentence included 5 years' imprisonment as the enhanced punishment in accordance with § 13A-12-250. The trial court responded that it did.
[2] We note that, prior to the plea proceeding, the prosecution filed a "Notice to Defendant of Request for Additional Penalty," requesting that the trial court, "in addition to any penalty imposed upon a conviction in this case[,] impose an additional penalty of five years' incarceration...."
[3] The trial court had failed to advise Rivers of any minimum possible sentence for the charge of unlawful distribution of a controlled substance and had incorrectly advised Rivers of the minimum sentence for the charges of unlawful possession of a controlled substance.
[4] The Brannon court held that, although the issue had not been preserved, the appellant, convicted for a drug offense, had been illegally sentenced under the Habitual Felony Offender Act, § 13A-5-9, contrary to Ex parte Chambers, 522 So. 2d 313 (Ala.1987). This holding however was implicitly overruled in Ex parte Jackson, 590 So. 2d 901 (Ala.1991), when the court explicitly overruled Blair v. State, 549 So. 2d 112 (Ala.Cr. App.), cert. denied, 549 So. 2d 114 (Ala.1988), which held that, although the appellant had made no objection to his sentence under the Habitual Felony Offender Act for a drug-related conviction, he should be resentenced because his sentence was illegal under Chambers. The Jackson court stated that it was "overrul[ing] Blair v. State, supra, to the extent that it holds sentencing errors to be jurisdictional and, therefore, not subject to waiver," 590 So. 2d at 903. We note, however, that Jackson appears to have been implicitly overruled by Ex parte McKelvey, 630 So. 2d 56 (Ala.1992).
[5] We have construed the trial court's lack of jurisdiction to render judgment or to impose sentence, A.R.Cr.P.Temp. 20.1(b) (now A.R.Cr.P. 32.1(b)), to be the ground that was the basis for the Rivers holding because, in accordance with A.R.Cr.P.Temp. 20.2(a)(3) (now A.R.Cr.P. 32.2(a)(3)), that ground was not precluded by the failure to preserve it in the trial court, as it would have been had the ground been that "[t]he sentence imposed exceeds the maximum authorized by law, or is otherwise not authorized by law," A.R.Cr.P.Temp. 20.1(c) (presently Rule 32.1(c)). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2452908/ | 982 S.W.2d 107 (1998)
Mark S. MOULTON, Appellant,
v.
Richard VAUGHN, Appellee.
No. 01-98-00010-CV.
Court of Appeals of Texas, Houston (1st Dist.).
May 14, 1998.
Opinion Overruling Rehearing July 9, 1998.
*108 Henry Caly McGuffey, Austin, for Appellant.
Robert J. Thomas, Houston, for Appellee.
Before COHEN, WILSON and NUCHIA, JJ.
OPINION
NUCHIA, Justice.
Appellant, Mark S. Moulton, Chief of Police of the University of Houston Downtown (UH-Downtown), brings this interlocutory appeal from denial of his motion for summary judgment based on official immunity. We reverse and render judgment that appellee, Richard Vaughn, take nothing.
Facts
Vaughn had worked for several years as a peace officer with the University of Houston central campus police department when he applied for a position as a peace officer for the UH-Downtown campus. The downtown campus and the central campus are run as distinct, individual institutions; their respective police departments have separate chains of command and independent hiring procedures. Although the two campuses operate independently, they are governed by a single Board of Regents.
Moulton sent a letter to Vaughn informing him he had been selected for employment contingent on the results of physical, psychological, and polygraph examinations. Before undergoing the psychological evaluation, Vaughn signed a form consenting to the release of the results to only two entitiesthe downtown police department and the Texas Commission on Law Enforcement Officer Standards and Education. There was no mention of the central campus police department.
Dr. Gregory Riede, a psychologist hired by UH, evaluated Vaughn. Based on the results, he refused to certify that Vaughn was psychologically fit for employment. Moulton rescinded the job offer. On the advice of a University of Houston staff attorney who represents both the downtown and the central campus, Moulton met with George Hess, chief of the central campus police department, and divulged the results of Vaughn's exam. Hess placed Vaughn on administrative leave with pay and ordered additional testing. After two other psychologists evaluated Vaughn and refused to certify him fit for duty, Hess terminated him.
Vaughn sued UH-Downtown and Moulton in his official capacity for wrongful disclosure of the psychological test results. The trial court denied Vaughn's motion for summary judgment and rendered summary judgment for UH and Moulton. Vaughn amended his petition to name Moulton in his individual capacity. The Fourteenth Court of Appeals reversed the judgment as to Moulton, noting Moulton needed to argue official immunity, not sovereign immunity, and that he had submitted no proof the elements of official immunity. Vaughn v. Moulton, No. 14-95-01467-CV, 1997 WL 128543 (Tex.App.-Houston [14th Dist.] 1997, no writ) (op. on reh'g) (not designated for publication). *109 Moulton filed a new motion for summary judgment, asserting official and quasi-judicial immunity. The trial court denied the motion, and this interlocutory appeal ensued.
Standard of Review
Summary judgment is proper when a movant establishes there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. Randall's Food Mkts., Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex.1995); Bangert v. Baylor College of Med., 881 S.W.2d 564, 566 (Tex.App.-Houston [1st Dist.] 1994, writ denied). In reviewing the summary judgment, we indulge every reasonable inference in favor of the nonmovant and resolve any doubts in its favor. Johnson, 891 S.W.2d at 644; Bangert, 881 S.W.2d at 565-66. A defendant is entitled to summary judgment if he conclusively establishes all elements of an affirmative defense as a matter of law. Roark v. Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 495 (Tex.1991); Bangert, 881 S.W.2d at 566. We must determine if Moulton conclusively established each element of the defense of official immunity
Official Immunity
To show he is entitled to official immunity, Moulton must show his disclosure of the test results to Hess was (1) a discretionary function, (2) performed in good faith, and (3) within the scope of his authority. Kassen v. Hatley, 887 S.W.2d 4, 8-9 (Tex.1994).
1. Discretionary Function
An official is not entitled to immunity when he performs a ministerial duty. Id. at 9. If an act involves personal deliberation, decision and judgment, it is discretionary; actions which require obedience to orders or the performance of a duty to which the actor has no choice, are ministerial. City of Lancaster v. Chambers, 883 S.W.2d 650, 654 (Tex.1994). Vaughn contends the Health and Safety Code expressly forbids disclosure of mental health records. Thus, he argues, Moulton's act was ministerial because he had no choice but to keep the test results confidential. Moulton, based on the same statute, argues his act was discretionary, not ministerial.
The relevant portion of the statute governing disclosure of mental health records provides:
A person who receives information from confidential communications or records may not disclose the information except to the extent that disclosure is consistent with the authorized purposes for which the person first obtained the information.
TEX. HEALTH & SAFETY CODE ANN. § 611.004(d) (Vernon Supp.1998). This is not a blanket prohibition against disclosureit permits disclosure in certain circumstances. Because the recipient of the information may decide to disclose it, the act of disclosure necessarily involves deliberation and the exercise of discretion. We hold Moulton was performing a discretionary act, not a ministerial one.
2. Good Faith
If a reasonably prudent officer, under the same or similar circumstances, could have believed disclosure was consistent with the purposes for which he obtained the confidential information, Moulton acted in good faith. See Chambers, 883 S.W.2d at 656. We note at the outset that, before disclosing the information, Moulton met with a University of Houston systems attorney and sought her advice on how to proceed. In his deposition and affidavit, Moulton testified he acted without ill will, bad faith, bad feelings toward Vaughn, or with reckless disregard for Vaughn's rights. In an affidavit submitted in support of the motion for summary judgment, Donald R. Cannon, police chief at the University of Texas, testified he would consider it his duty, and the duty of any police chief of a university system in Texas, to report information concerning an officer's psychological fitness for duty to his supervisor. These affidavits established a prima facie showing of good faith. Thus, the burden shifted to Vaughn to submit a counteraffidavit or otherwise show that no reasonable person in Moulton's position could have thought his acts were justified. See id. at 657. Vaughn did not meet this burdenhe submitted no controverting affidavits. Although Vaughn objected to Moulton's affidavits, this did not discharge his burden.
*110 In a cross-point, Vaughn contends the trial court erred in overruling his objections.[1] Because we are rendering judgment for Moulton, we will rule on this cross-point, even though this appeal would otherwise be limited to the issue of immunity.
Vaughn objected that Cannon's affidavit was not relevant, not reliable, not based on personal knowledge, merely based on opinion, self-serving, biased, and not credible. Most of these (i.e., not relevant, not reliable, self-serving, biased, not credible) are general objections. Moreover, they are directed to the affidavit as a whole and do not point out which part is objectionable on which ground. Consequently, they preserve nothing for review. See TEX.R.APP.P. 33.1(a)(1)(A).
Vaughn also objected that the affidavit was inadmissible under E.I. du Pont de Nemours & Co. v. Robinson, 923 S.W.2d 549, 557 (Tex.1995). Cannon's affidavit provides:
I am the Chief of Police at The University of Texas at Austin and have served in that capacity for 27 years. Prior to that, my experience in law enforcement included 5 years as the Chief of Police, City of Killeen, Texas. I am competent to make this Affidavit.
If I received information in my official capacity as a Chief of Police within the University of Texas System, I would consider such information to be disclosed to the University of Texas System Police. If I were informed that an officer employed by a component institution of the University of Texas System was not certifiable as being psychologically fit to be a police officer, the interests of the safety of those individuals who might come into contact with the officer would require me to notify the police chief responsible for that officer's actions. In my opinion, a chief of police at one university component has an official duty to report such information to the police chief at another university component who is responsible for the conduct of that officer.
In my opinion, any police chief of a university system in Texas with multiple campuses has a duty to the public which requires reporting to the supervising police chief any information concerning an officer's being psychologically unfit for duty. Under Texas law, only those peace officers who are psychologically fit for duty may hold active positions in law enforcement.
As a Chief of Police, being formally notified by a psychologist or psychiatrist that an officer is not psychologically fit for duty, I would consider it my duty to exercise discretion and take appropriate action to protect the public, especially when I have authorization to receive the results of an officer's psychological exam to determine his fitness for duty.
In my opinion, any police chief of a university system in Texas with multiple campuses has a duty to the public which requires reporting to the supervising police officer any information concerning an officer's being psychologically unfit for duty.
The trial judge could have concluded, within his broad discretion in evidentiary matters, that this was opinion testimony of an expert, admissible under TEX.R.CIV.EVID. 702. See also TEX.R.CIV.EVID. 703-705. This is also dispositive of appellant's objection that the affidavit was merely based on opinion and not on personal knowledge.
We hold that Vaughn did not controvert Moulton's showing of good faith and the trial court did not err in overruling Vaughn's special exceptions and objections.
3. Scope of Authority
An official acts within the scope of his authority if he is discharging the duties generally assigned to him. Chambers, 883 S.W.2d at 658. The president of the UH-downtown campus, Dr. Max Castillo, testified by deposition that Moulton's duties include recruiting employees and making personnel recommendations to the board. Psychological testing is a required part of the hiring *111 process because Texas will not permit a person to be licensed as an officer unless he has been examined by a psychologist or psychiatrist and declared to be in satisfactory psychological and emotional health. See TEX. GOV'T CODE ANN. § 415.057(a)(1) (Vernon 1992). Moulton was discharging his general duties when he directed Vaughn to undergo testing, obtained the results, and decided to disclose the results to his counterpart at the central campus. Vaughn offered no evidence to suggest Moulton was not discharging his general duties.
We hold Moulton was acting within the scope of his authority.
Moulton established each element of official immunity. Accordingly, we reverse and render judgment that Vaughn take nothing.
O'CONNOR, Justice, dissenting on overruling of motion for rehearing en banc.
This case involves the disclosure of mental health information by a government employee in violation of Health & Safety Code §611.004(d) (1998). I dissent from the overruling of the appellee's motion for rehearing en banc.
Richard Vaughn, who was serving as a police officer with the University of Houston at the Central Campus Police Department, applied for a job as a police officer at the UH-Downtown Campus Police Department. Vaughn was offered a job at the UH-Downtown Campus by the chief of police of the downtown campus, Mark Moulton. The job offer was contingent upon Vaughn's successful completion of a psychological examination.
The psychologist who administered the test refused to certify that Vaughn was psychologically fit for employment as a police officer. Moulton withdrew the contingent offer and Vaughn was not hired as an officer at the Downtown campus. Shortly after withdrawing the offer, Moulton disclosed the results of Vaughn's psychological evaluation to Vaughn's then-current employer, UH - Central Campus, which led to Vaughn's dismissal.
Mental Health Records Code
Vaughn sued Moulton under chapter 611 of the Texas Mental Health Records Code, which deals with confidentiality of mental health information. Following are the sections of the code relevant to this lawsuit.
Section §611.002(a):
Communications between a patient and a professional, and records of the identity, diagnosis, evaluation, or treatment of a patient that are created or maintained by a professional, are confidential.
TEX. HEALTH & SAFETY CODE § 611.002(a) (1998).
Section §611.004(d):
A person who receives information from confidential communications or records may not disclose the information except to the extent that disclosure is consistent with the authorized purposes for which the person first obtained the information.
Id. §611.004(d).
Section §611.005(c):
The aggrieved person also has a civil cause of action for damages.
Id. §611.005(c).
Section 611.004(d) prohibits the release and use of mental health information as was released and used in this case. The rule stated in section 611.004(d) is simplemental health information obtained for one purpose may not be used for another purpose. In this case, it was. Everyone admits the psychological test results were obtained to evaluate Vaughn for a new job with the UH-Downtown campus; they were not obtained to evaluate him for his then-current job. Thus, the information was disclosed and used for a purpose for which it was not initially obtained.
The panel interpreted the word "except" in section 611.004(d) to mean there is an exception to the rule. There is no exception. The rule is that mental health information may not be used for any purpose "except" for the purpose for which the information was first obtained.
In analyzing whether Moulton had the discretion to divulge the information or had a ministerial duty not to divulge it, the panel *112 bases its opinion on its interpretation of the word "except." The panel states that section 611.004(d) is "not a blanket prohibition against disclosure." I disagree. It is a blanket prohibition mental health information cannot be used for anything except for the purposes for which it was obtained. The panel seems to read section 611.004(d) as permitting the very thing it prohibits.
Moulton clearly performed a ministerial act when he disclosed the information for a purpose other than the one for which he first obtained it. Section 611.004(d) did not give Moulton the authority to use the information for anything except for Vaughn's application for the new job.
I would affirm the summary judgment. The trial court's judgment was clearly correct.
A majority of the justices of the Court voted to overrule the motion for rehearing en banc.
NOTES
[1] Although Vaughn styled his objections "Special Exceptions and Objections," there were no special exceptions. He leveled a general objection as follows to all of appellant's affidavits: "[T]hey are self-serving affidavits which state grounds that are unclear and/or ambiguous and/or without any authority, either statutory and/or case law." This objection is too general to preserve anything for review. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543813/ | 55 B.R. 78 (1985)
In re W.E. TUCKER OIL COMPANY, INC., Debtor.
W.E. TUCKER OIL COMPANY, INC. and Claude S. Hawkins, Jr., Trustee, Plaintiffs,
v.
FIRST STATE BANK OF CROSSETT, Portland Bank, Defendant, Intervenor.
Bankruptcy No. ED 84-11M, Adv. No. 84-405M.
United States Bankruptcy Court, W.D. Arkansas, El Dorado Division.
September 5, 1985.
*79 Claude Hawkins, Ashdown, Ark., for plaintiffs.
Richard Griffin, Crossett, Ark., for First State Bank of Crossett.
R.J. Brown, Little Rock, Ark., for E.A. Tucker.
Thomas S. Streetman, Crossett, Ark., for Portland Bank.
MEMORANDUM OPINION
JAMES G. MIXON, Bankruptcy Judge.
The trustee of W.E. Tucker Oil Company, Inc., has filed this action to set aside certain transfers of the debtor's property against First State Bank of Crossett. Portland Bank intervened on behalf of the plaintiff. The trustee asserts that the transfers are fraudulent conveyances under 11 U.S.C. § 548 and preferential transfers under 11 U.S.C. § 547. The trustee alleges that the Bank was an insider.
The debtor filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code on February 1, 1984. The debtor is a closely held Arkansas corporation. E.A. "Sonny" Tucker (Sonny Tucker) is the owner of thirty percent of the outstanding shares of stock. He also holds the office of president of the corporation and is the chief operating officer at all relevant times. Maysel A. Tucker, the mother of Sonny Tucker, owns forty percent of the outstanding stock and is chairman of the board of directors. Sue T. Nolan, sister of Sonny Tucker, owns thirty percent of the outstanding stock and holds the office of secretary-treasurer. Sue T. Nolan's husband, Johnny M. Nolan, owns no stock but is a vice president of the company and was active in the operation of the business.
Generally, W.E. Tucker Oil Company, Inc., is engaged in the business of a wholesale gasoline distributor in south Arkansas. Debtor's business also included the ownership of several retail gasoline stations in Monticello, Dermott, McGehee, Crossett, Eudora, Hamburg, Lake Village and Portland, Arkansas. Typically, these properties were leased to operators who sold products supplied by the debtor.
In 1979 Sonny Tucker acquired twenty-five percent of the stock in Davis Industries, Inc., an Arkansas corporation. The other stockholders in Davis Industries, Inc., were Bobby G. Davis, James L. Sanderlin and George E. Locke. Each owned twenty-five percent of the outstanding stock.[1] James L. Sanderlin was also employed by W.E. Tucker Oil Company, Inc., debtor, as an independent certified public accountant and was a close personal friend of Sonny Tucker. James L. Sanderlin prepared the books for both W.E. Tucker Oil *80 Company, Inc., and Davis Industries, Inc. During 1982 and 1983 Sonny Tucker also owned 2,500 shares of stock in First State Bank of Crossett (FSB), the defendant in this action. He was a member of FSB's board of directors and a member of the executive committee until his resignation in November of 1983.
Beginning in January of 1981, FSB made a series of loans to various individuals and entities as follows:
1. Note No. 56316, dated January 9, 1981,
Maker: Bobby G. Davis, Amount $46,133.65
19% interest, Due on 4/9/81 or demand
Extended 4/16/81 $36,133.65
Extended 11/19/81 $29,133.65
Extended 6/6/82 $18,133.65
Extended 10/25/82 $18,133.65
2. Note No. 56371, dated February 27, 1981
Maker: J.M. Nolan, Amount $60,000.00
19% interest, Due on 5/28/81
Extended 11/19/81 $60,000.00
Extended 6/6/82 $60,000.00
Extended 10/25/82 $60,000.00
3. Note No. 56751, dated November 19, 1981
Maker: James L. Sanderlin, Amount
$50,000.00
17.5% interest, Due on 2/17/82 or demand
Extended 6/6/82 $50,000.00
Extended 10/25/82 $50,000.00
4. Note No. 56861, dated January 13, 1982
Maker: E.A. Tucker, Amount $120,000.00
16.5% interest, Due on demand
Extended 10/25/82 $120,000.00
5. Note No. 56864, dated January 13, 1982
Maker: J.L. Sanderlin, Amount $23,500.00
Due on demand
Extended 10/25/82 $23,500.00
6. Note No. 56863, dated January 13, 1982
Maker: Davis Industries, Inc., Amount
$20,000.00
Due on demand
Extended 10/25/82 $20,000.00
7. Note No. 56962, dated March 2, 1982
Maker: Davis Apparel Mfg., Inc.,
Amount
$240,000.00, Due on demand
Extended 10/25/82 $228,000.00
On March 2, 1982, Sonny Tucker, on behalf of W.E. Tucker Oil Company, Inc., executed a series of mortgages to FSB to secure the various notes described above. These mortgages granted liens to FSB in various real properties owned by the debtor, W.E. Tucker Oil Company, Inc. Sonny Tucker admitted that the debtor received none of the loan proceeds. Moreover, because of a bank oversight, these mortgages were not recorded in the appropriate offices of the circuit clerk until April 6, 1983, which was within one year before the filing of the bankruptcy petition in this case.
It is not necessary to reach the more difficult question regarding the alleged preferential transfers and FSB's status as an insider because the trustee has established that these transfers should be set aside as constructive fraudulent transfers under 11 U.S.C. § 548(a)(2)(A) and (B)(i), (ii). This section provides:
The trustee may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within one year before the date of the filing of the petition, if the debtor voluntarily or involuntarily
(2)(A) received less than a reasonably equivalent value in exchange for such transfer or obligation; and
(B)(i) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation; (ii) was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital; or . . .
*81 There is no question that property of the estate was transferred because the granting of a lien in real property of the debtor is a transfer within the meaning of 11 U.S.C. § 548. The transfer is deemed to have occurred at the time the lien is perfected if perfection occurs before filing. In re Hogg, 35 B.R. 292 (Bkrtcy.D.S.D. 1983); In re Gurs, 34 B.R. 755 (Bkrtcy. App. 9th Cir.1983); In re Lyon, 35 B.R. 759 (Bkrtcy.D.Kan.1982); In re Caudy Custom Builders, Inc., 31 B.R. 6 (Bkrtcy.D.S.C. 1983). The recording of the mortgages in the office of the circuit clerk on April 6, 1983, constituted the final step under Arkansas law to perfect the transfer of the lien from claims of bona fide purchasers. Ark.Stat.Ann. § 51-1002 (Repl.1971); Thornton v. Findley, 97 Ark. 432, 134 S.W. 627 (1911). Perfection occurred within one year of the filing of the petition.
The trustee is also required to prove under Section 548 that the debtor received less than a reasonably equivalent value in exchange for the transfer. 11 U.S.C. 548(d)(2)(A) defines value under this section to mean, "property or satisfaction or securing of a present or antecedent debt of the debtor. . . ." A transfer made to benefit third parties is clearly not made for a fair consideration or for value unless the debtor is also benefited. 4 Collier on Bankruptcy ¶ 548.09 (15th ed. 1984); Matter of Evans Potato Co., Inc., 44 B.R. 191 (Bkrtcy.S. D.Ohio, W.D.1984). Since the lien was granted to secure a loan to third parties, there was no economic benefit to the debtor.
The trustee's remaining burden is to establish the elements under 11 U.S.C. § 548(a)(2)(A) and (B)(i) or (ii), either of which is sufficient to set aside the transfer. 4 Collier on Bankruptcy §§ 548.03, 548.04 and 548.05 (15th ed. 1984). In re Bell & Beckwith, 44 B.R. 656 (Bkrtcy.N.D.Ohio, W.D.1984). The trustee's evidence clearly and unmistakably establishes that the debtor was insolvent before and after the transfers and that after the transfers an unreasonably small amount of capital remained for the debtor to engage in its business.
The evidence concerning the issue of insolvency consisted primarily of the testimony of the debtor's accountant and two exhibits, the debtor's financial statement and the debtor's tax return. The financial statement was for the period July 1, 1982 through June 30, 1983. This is shown as Exhibit 20 to the deposition of James L. Sanderlin which was introduced as Exhibit 2 at the trial. The debtor's tax return for the same period was introduced as Exhibit 17 to Sanderlin's deposition and as Exhibit 2 at the trial. The financial statement indicated that the debtor had a net worth as of June 30, 1983, of $887,413.00. However, the balance sheet on the tax return reflected the debtor's financial condition to be insolvent by the sum of ($510,567.89). Both documents were prepared by James L. Sanderlin, supposedly from the same books and records. Mr. Sanderlin testified that the financial statement, showing a positive net worth, more accurately reflected the debtor's true financial condition. However, the Court does not find his testimony credible. For instance, Mr. Sanderlin was asked by the trustee to explain how he could have prepared a tax return for the debtor for the year ending June 30, 1982, reflecting income of ($406,838.00) and a financial statement for the same period which shows income to be $152,429.00, and both documents be accurate. The witness could offer no explanation.
According to the financial statement, on June 30, 1983, the debtor had cash in the sum of $369,268.00, while the tax return shows cash at $48,837.00. The difference, according to Mr. Sanderlin, was a certificate of deposit in the name of Sonny Tucker and Tucker's family which was treated as an asset of the corporation for purposes of the financial statement. The certificate of deposit was not treated as an asset of the corporation on the bankruptcy petition, nor on the tax return for fiscal 1983.
The June 30, 1983, financial statement reflected receivables to be $1,332,175.00 whereas the tax return lists them at $402,540.00. This is a difference of $929,650.00, which is about the amount of an alleged *82 receivable due the debtor from Davis Industries, Inc., not including any liability as a result of the transfers in question. Mr. Sanderlin testified that the receivable from Davis Industries, Inc., was not shown as a receivable on the tax return but was shown on the financial statement.
The account receivable from Davis Industries, Inc., may well have been a contrived account. The evidence on this point is mostly circumstantial but is persuasive. The receivable from Davis Industries, Inc., allegedly resulted from loans made by W.E. Tucker Oil Company, Inc., over a period of time in 1981 through 1983. These loans were not made in the ordinary course of business of W.E. Tucker Oil Company, Inc., but were made, according to Sonny Tucker, to further the shareholder interests of Sonny Tucker and his business associates, James L. Sanderlin, Bobby G. Davis and George E. Locke.
The loans from debtor to Davis Industries, Inc., are not evidenced by promissory notes and are not recorded in any books of account of the debtor. James L. Sanderlin testified that when Davis Industries, Inc., filed bankruptcy, he prepared the schedules and statements of affairs. These schedules failed to reflect any debt owing to W.E. Tucker Oil Company, Inc., from Davis Industries, Inc. The debtor's tax returns during the period of time the loans were purportedly made reflect that the debtor would not have had funds from current operations to make loans in these amounts.[2]
The tax returns were verified under oath as being true and correct and constitute evidence in the nature of an admission by the debtor. These documents reflect the solvency of the debtor as follows:
6-30-80 $322,007.73
6-30-81 153,171.87
6-30-82 (253,666.89)
6-30-83 (510,568.00)
Based on this evidence, the Court is persuaded that at the time of the transfer in March, 1983, and many months before that time, the debtor was insolvent. The transfers of the liens in question simply rendered the company further insolvent.
The proof also establishes, without any doubt, that at the time of the transfers, and immediately thereafter, and as a direct result of the transfers, the debtor had an unreasonably small amount of capital with which it could continue doing business. By February, 1984, Exxon, a significant creditor and the source of the debtor's principal inventory, gasoline, had placed the debtor on C.O.D. accepting certified checks only because the debtor had begun to habitually pay for gasoline with insufficient fund checks. Sonny Tucker admitted that trouble began with Exxon as early as November of 1982, but tended to minimize its severity.
Beginning in January of 1983, the debtor's bank accounts were always overdrawn according to the check book reconciliations. Checks were presented to banks almost daily for which there were insufficient funds. The banks would debit the debtor's account an overdraft charge, call the debtor and hold the checks until the debtor could get to the banks, with additional deposits. The debtor had a significant number of overdraft charges beginning in January 1983. There was also evidence of an active check kiting scheme indicating a desperate need to create cash. The debtor's condition deteriorated steadily downward until the petition was filed in February of 1984.
Having found all of the elements of a fraudulent conveyance under 11 U.S.C. § 548, the Court will enter a separate judgment setting aside First State Bank of Crossett's claim of lien on the debtor's property described herein. Since the First State Bank of Crossett has no claim except *83 its claim of lien, its claim is disallowed in full.
IT IS SO ORDERED.
NOTES
[1] The witnesses often referred to Davis Industries, Inc., as the sister company of Davis Apparel Manufacturing, Inc. Davis Apparel Manufacturing, Inc., is owned by the same individuals in the same percentages as Davis Industries, Inc.
[2] Taxable income (not including depreciation).
Year Ending 6/30/80 $202,066.46
Year Ending 6/30/81 ( 32,534.18)
Year Ending 6/30/82 (442,501.38)
Year Ending 6/30/83 (701,148.00)
Net Operating Loss 1980-1983 = ($974,117.10) | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543816/ | 55 B.R. 596 (1985)
In re NEXUS COMMUNICATIONS, INC., t/a WSES-AM ID#: XX-XXXXXXX, Debtor.
Bankruptcy No. S-85-01511-5.
United States Bankruptcy Court, E.D. North Carolina.
December 5, 1985.
John R. Wallace, Peter J. Sarda, Kirby, Wallace, Creech, Sarda & Zaytoun, Raleigh, N.C., for debtor.
J. David Farren, Tharrington, Smith & Hargrove, Raleigh, N.C., for Special Markets Media, Inc.
MEMORANDUM OPINION AND ORDER
A. THOMAS SMALL, Bankruptcy Judge.
The matters before the court are the motions of Special Markets Media, Inc. ("Special Markets"), for abstention and dismissal under 11 U.S.C. § 305, and for a lifting of the automatic stay, and the motion of the debtor, Nexus Communications, Inc. ("Nexus"), to assume a lease. A hearing to consider these motions was held on November 25, 1985, in Raleigh, North Carolina.
FACTS
Nexus Communications, Inc., is a chapter 11 debtor in possession having filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code on September 6, 1985. Nexus owns and operates a radio station, WSES-AM, in Raleigh, North Carolina, which it purchased from a bankruptcy estate. As part of the purchase, Nexus became the assignee of a lease of a radio studio and transmission tower owned by Special Markets. In addition to being Nexus's landlord, Special Markets owns radio station WLLE-AM, which is WSES-AM's primary competitor.
Special Markets contends that it terminated the lease in May of 1985, when Nexus failed to pay its monthly rent. The debtor contends that the lease has not been properly terminated, and that because Special Markets failed to make required repairs to the tower, the debtor may offset its costs of repair against rent due. Nexus *597 maintains that the rent is not delinquent, and the lease is not in default.
The parties' dispute was brought to Small Claims Court in Wake County, North Carolina, where Special Markets brought an eviction action. After a two-day trial, the magistrate held that the lease had been properly terminated, and an Order of Summary Ejectment was entered. Nexus filed Notice of Appeal to state District Court, and a trial de novo was scheduled. The debtor's chapter 11 petition was filed on the eve of the trial.
The debtor's petition lists taxes due of $6,200, two unsecured debts totalling $2,800, and a disputed secured debt to Special Markets of $5,700. The debtor's assets consist of cash $1,000, utility deposits $1,290, and furniture and equipment $65,000.
JURISDICTION AND AUTHORITY OF BANKRUPTCY COURT
No party has questioned the court's jurisdiction and there has been no challenge to the bankruptcy court's authority to hear and determine these motions. Nevertheless, a brief discussion of the bankruptcy court's authority is appropriate.
This court has jurisdiction over the parties and subject matter of this proceeding pursuant to 28 U.S.C. §§ 1334, 151, and 157, and the General Order of Reference entered by the United States District Court for the Eastern District of North Carolina on August 3, 1984.
The motion for abstention and dismissal of the entire case pursuant to 11 U.S.C. § 305 would appear to be a matter "concerning the administration of the estate," and thus, a "core" proceeding under 28 U.S.C. § 157(b)(2)(A). Nothing could be closer to the "core" of a bankruptcy case than a request under 11 U.S.C. § 305 to extinguish the case in its entirety. What causes some concern, however, is 11 U.S.C. § 305(c) which says that a decision to dismiss or not to dismiss under 11 U.S.C. § 305(a) is not reviewable by appeal or otherwise. If the decision of the bankruptcy court is not reviewable, does this not eliminate the district court's control, and thereby undermine the constitutional basis of the bankruptcy court's authority?
An argument can certainly be made that in view of the changes made by the Bankruptcy Amendments and Federal Judgeship Act of 1984, the order which 11 U.S.C. § 305(c) makes unappealable is an order entered by the district court. If that is so, the bankruptcy court's order to abstain may be appealed to the district court. See Farmer v. First Virginia Bank of Fairfax County, Va., 22 B.R. 488 (D.C.E.D.VA 1982). On the other hand, 11 U.S.C. § 305 does not specify that the order is nonappealable only if it is an order signed by a district court judge. The language of 11 U.S.C. § 305(c) is clear, there shall be no review by appeal or otherwise. See In re Currency Exchange, Inc., 762 F.2d 542 (7th Cir.1985).
When a case is referred to the bankruptcy court, the bankruptcy judge, as a unit of the district court, exercises the authority of the district court subject to the limitations found in chapter 6 of title 28 of the United States Code. 28 U.S.C. § 151. There is no limitation in chapter 6 of title 28 to the bankruptcy judge's power to enter final orders concerning motions to abstain under 11 U.S.C. § 305. Accordingly, the court concludes that the motion to abstain pursuant to 11 U.S.C. § 305 is a core proceeding which this court may hear and determine. (28 U.S.C. §§ 157(b)(2)(A) and 157(b)(1)).
The debtor's motion to assume the lease is also a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A). In re Turbowind, Inc., 42 B.R. 579 (Bankr.S.D.CA 1984). So too, is the determination of whether the lease has been terminated. Matter of Republic Oil Corporation, 51 B.R. 355, 13 BCD 521 (Bankr.W.D.WI 1985). Litigation over whether the debtor breached the lease and whether the lease was terminated is similar to the breach of contract action which the Supreme Court, in Northern Pipeline Construction Co. v. Marathon Pipe Line Company, 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), said could not *598 be heard and determined by a non-Article III court. The present dispute, however, arises in the context of a motion to assume the lease and its resolution is an essential component of the bankruptcy court's determination of that motion. The dispute arises under the Bankruptcy Code (11 U.S.C. § 365) in a case under the Bankruptcy Code. If the lease is in default, the default must be cured or adequate assurance given that there will be a prompt cure as a condition of assumption (11 U.S.C. § 365(b)(1)). If the lease has been terminated prior to bankruptcy, there can be no assumption. 11 U.S.C. § 365(c)(3) prohibits assumption of a lease of nonresidential real property which was terminated prior to bankruptcy. See Matter of Mimi's of Atlanta, Inc., 5 B.R. 623 (Bankr.N.D.GA 1980); and In re Acorn Investments, 8 B.R. 506 (Bankr.S.D.CA 1981).
Whether the lease was in default, and whether the lease was terminated depends entirely upon State law. But, "(a) determination that a proceeding is not a core proceeding shall not be made solely on the basis that its resolution may be affected by State law." 28 U.S.C. § 157(b)(3). The determination of the dispute concerning the status of a lease is a necessary part of the bankruptcy court's determination of the motion to assume the lease, and thus, it is an integral part of the administration of the case. As such, it is part of a core proceeding. See the Case Study in Broken Bench Review, Vol. 4 No. 7 (September, 1985) at 49, in which the core-noncore controversy is described as "The Battle Between The Forces of `Nexus' And The Forces Of `Purity' On A Darkling Plain."
Finally, the motion to lift the automatic stay is a core proceeding under 28 U.S.C. § 157(b)(2)(G).
DISCUSSION AND CONCLUSIONS
Special Markets argues that abstention under 11 U.S.C. § 305 is justified because the fortunes of the debtor turn entirely upon whether the lease was terminated prior to bankruptcy. Special Markets contends that this controversy should be heard in state court. If the lease was terminated prior to the debtor's petition, it may not be assumed by the debtor. If, on the other hand, the lease was not properly terminated, the debtor may be able to assume the lease and cure any defaults pursuant to 11 U.S.C. § 365(a) and (b). But, even if the debtor is ultimately evicted, it will still require chapter 11 protection to preserve its assets while it seeks another location. Special Markets has not shown that the chapter 11 petition was filed in bad faith, that reorganization is not necessary, or that reorganization is not in the debtor's best interest. The court is not persuaded that abstention under 11 U.S.C. § 305 is appropriate in this case, and the motion to abstain will be denied.
Special Markets' motion to lift the automatic stay to permit the parties to litigate the lease dispute in state court will also be denied.
11 U.S.C. § 362(b)(9)[10] provides that the automatic stay of § 362(a) does stay
any act by a lessor to the debtor under a lease of nonresidential real property that has terminated by the expiration of the stated term of the lease before commencement of or during a case under this title to obtain possession of such property (emphasis added).
The lease at issue is a nonresidential lease of real property, but Special Markets does not contend that the lease was terminated by the "expiration" of its "stated term." If there was a termination of the lease, it did not happen automatically it was the result of the affirmative act by Special Markets in terminating for failure to make rent payments.
The motion to lift the stay is in essence a request that the court voluntarily abstain from determining the litigation concerning the lease. True, the dispute will be resolved by applying State law, but the State law on this point is neither complicated nor unsettled. A determination was made by a magistrate in Small Claims Court that the lease was terminated, but that determination is not final, and eviction is stayed *599 pending a final determination if the monthly rent is paid in the interim. N.C.GEN. STAT. § 42-34(b) (1984). This proceeding is not one in which abstention is warranted, and Special Markets' interests will be adequately protected if the debtor continues to pay the monthly rent pending a determination of the status of the lease.
The controversy surrounding the lease will be heard and determined by the bankruptcy court as a contested matter to assume a lease under Bankruptcy Rules 6006 and 9014. Accordingly,
IT IS HEREBY ORDERED that the motions of Special Markets Media, Inc. for abstention and dismissal under 11 U.S.C. § 305(a) and to lift the automatic stay of 11 U.S.C. § 362(a) are DENIED; and
IT IS FURTHER ORDERED that the Clerk's Office shall reschedule the hearing to consider the debtor's motion to assume the lease. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543823/ | 237 N.J. Super. 282 (1989)
567 A.2d 598
JAMES WILKERSON, PLAINTIFF,
v.
C.O. PORTER MACHINERY CO., COPCO, INC., A SUBSIDIARY OF TANNEWICZ, INC., STARMARK INDUSTRIES, INC., JOHN DOE I AND JOHN DOE II, DEFENDANTS.
Superior Court of New Jersey, Law Division Union County.
Decided June 30, 1989.
*284 Francis J. Dooley for plaintiff.
Martin B. Wallerstein for defendant (Di Rienzo, Wallerstein & Fellman, attorneys).
WECKER, J.S.C.
Defendant COPCO, INC. ("COPCO") seeks summary judgment on this products liability claim on the ground that it did not manufacture the radial saw that caused plaintiff's injury. Defendant admits it purchased assets of the actual manufacturer, C.O. Porter Machinery Co. ("C.O. Porter") in bankruptcy and continued to produce a similar model saw. However, COPCO argues that New Jersy's successor liability doctrine, as set forth in Ramirez v. Amsted Industries, Inc., 86 N.J. 332 (1981) and its companion case, Nieves v. Bruno Sherman Corp., 86 N.J. 361 (1981), does not apply.
Defendant seeks to avoid the Ramirez successor liability principle based upon a factual distinction between this plaintiff's circumstances and those of the claimants in Ramirez and Nieves. The question is whether this distinction makes a *285 difference. The issue is one of first impression in New Jersey.[1] The factual distinction is that the sale of assets here was a sale in bankruptcy. The accident and injury for which plaintiff seeks recovery occurred after the asset sale and the bankruptcy order approving the sale. For reasons detailed below, I find that the bankruptcy sale makes no legal difference, and defendant COPCO is not entitled to summary judgment on this ground.
C.O. Porter filed a petition under Chapter 11 of the Bankruptcy Code, 11 U.S.C.A. § 1101 et seq., on March 1, 1983. On February 28, 1983, an agreement for the sale of most of the manufacturing equipment and related assets to defendant COPCO was executed.[2] That sale was approved in an order of the bankruptcy court in the western district of Michigan on April 25, 1983. The order confirming the sale provides, in part:
The property is sold free and clear of all liens, claims (absolute or contingent) and encumbrances, with the interest of any parties asserting liens therein and claims and/or encumbrances thereon attaching to the proceeds thereof with the same validity and in the same order of rank and priority as said liens, encumbrances and claims now exist in said property.
*286 On May 2, 1985 a debtor's amended plan for liquidation[3] was confirmed[4] and on March 5, 1987 an amended order closing the case was signed. C.O. Porter did not survive the bankruptcy and its dissolution is set forth in the order closing the case. The plan provides also that "confirmation of this Plan ... shall constitute complete settlement with creditors and interest holders, except as to payments called for by this Plan."
On August 13, 1984, plaintiff James Wilkerson ("Wilkerson") injured his hand while operating a cross-cut saw on the job. That saw had been manufactured by defendant C.O. Porter in 1974. It eventually came to be owned by plaintiff's employer. The saw on which plaintiff was injured was C.O. Porter's model 47-A-36. COPCO has continued to manufacture and sell what is admitted to be the same model, 47-A, and offers it in three different sizes: 20", 30", and 36". COPCO was incorporated in 1983. Its sales brochure advertises the saw under the COPCO name as follows:
*287 A DESIGN PROVEN OVER 40 YEARS.
Its literature further states:
Over 40 years of on-the-job service in plants throughout the country have proven the Hydracut 47-A to be the best hydraulically-controlled cut-off saw design in the industry.
In order to analyze defendant's claim, the claimed distinction must be examined carefully. On the obvious level, one can find that a potential claimant with a non-existent injury, who could not be notified of the bankruptcy proceeding, cannot be precluded from seeking a remedy by such orders. See, e.g., Schweitzer v. Consolidated Rail Corp., 758 F.2d 936, 943 (3 Cir.1985); Mooney Aircraft Corp. v. Foster (In re Mooney Aircraft, Inc.), 730 F.2d 367 (5 Cir.1984); In re UNR Industries, Inc., 29 B.R. 741 (N.D.Ill. 1983), app. dism., 725 F.2d 1111 (7 Cir.1984) (denying application to appoint nominal legal representative for unknown future asbestos victims to bind those victims in present bankruptcy proceeding). In Schweitzer, the circuit court distinguished a tort claimant from a plaintiff on a contract, who "bargain[ed] for a legal relationship with that debtor...." 758 F.2d at 943. But see, e.g., Conway v. White Trucks, 692 F. Supp. 442, 455, n. 9 (M.D.Pa. 1988) (trucker's accident occurred after the manufacturer's reorganization and asset sale in bankruptcy, but before the deadline for filing claims against the debtor-manufacturer).
That is perhaps too simplistic. The real question is whether the product-line theory of successor liability as carved out in Ramirez is so narrow as to exclude (and immunize) a purchaser of assets in bankruptcy. In other words, is there anything about a sale of business assets in bankruptcy that warrants greater protection from subsequent products liability claims than a purchase in a non-bankruptcy setting?[5]
*288 The mere fact that the bankruptcy order approves a sale purporting to transfer assets free and clear of various claims, even including contingent products liability claims, should not be determinative, as further discussed below. In Ramirez a purchase agreement that expressly denied the purchaser's assumption of liability for products claims that might be asserted against the manufacturer-seller was held not controlling. A bankruptcy order approving a sale of assets is intended to assure that assets are not being sold for less than fair market value, thereby depleting the estate to the detriment of its creditors. It has been argued that subjecting a sale of assets in bankruptcy to successor liability will devalue the bankrupt's estate and unfairly favor contingent claimants over other unsecured creditors. The New Jersey Supreme Court in Ramirez recognized and disposed of this argument, concluding that since the assets of the selling manufacturer were subject to the very same contingent claims, recognition of successor liability creates a more accurate market value for the assets. 86 N.J. at 353-355.
Ramirez adopted the "product line" exception to traditional successor liability law for certain products liability claimants who would otherwise be without a remedy.
[T]he general principle has been accepted in New Jersey that "where one company sells or otherwise transfers all its assets to another company the latter is not liable for the debts and liabilities of the transferor, including those arising out of the latter's tortious conduct." Menacho v. Adamson United Co., 420 F. Supp. 128, 131 (D.N.J. 1976) (applying New Jersey law); (additional citations omitted). However, there are four established exceptions to the general rule of corporate successor nonliability in asset acquisitions. Under the traditional approach the purchasing corporation will be held responsible for the debts and liabilities of the selling corporation, including those arising out of defects in the latter's products, where (1) the purchasing corporation expressly or impliedly agreed to assume such debts and liabilities; (2) the transaction *289 amounts to a consolidation or merger of the seller and purchaser; (3) the purchasing corporation is merely a continuation of the selling corporation, or (4) the transaction is entered into fraudulently in order to escape responsibility for such debts and liabilities. [Id. 86 N.J. at 340.]
Our Supreme Court chose to follow California and abandon
the traditional rule and its exceptions, utilizing instead the policies underlying strict liability in tort for injuries caused by defective products. [Id. at 347.]
To determine the scope of Ramirez requires examination of the "threefold justification" of the California Supreme Court decision that originated the "product line" theory of successor liability, adopted by the New Jersey Supreme Court in Ramirez, supra, 86 N.J. at 349. See Ray v. Alad Corp., 19 Cal.3d 22, 136 Cal. Rptr. 574, 560 P.2d 3 (1977). The first justification is:
the virtual destruction of the plaintiff's remedies against the original manufacturer caused by the successor's acquisition of the business.[6] [136 Cal. Rptr. at 580, 560 P.2d at 9; emphasis supplied.]
Unless the bankruptcy was brought on by a creditor who then purchased the assets, one might conclude from the literal language that a bankruptcy sale could never support successor liability. On the other hand, one must ask whether the courts in Ray or Ramirez focussed on the specific purchaser's role or whether they assumed that any transfer of a manufacturing business (or all of its assets) by definition destroys a products liability claimant's remedy against the manufacturer.
In other words, in the phrase "caused by the successor's acquisition of the business," is it the successor or the sale that is viewed as the cause of the "destruction of ... remedies"? If it is the sale, then bankruptcy warrants no blanket exemption. Nieves, the companion case to Ramirez, indicates that it is the *290 acquisition or transfer and not the particular acquirer that triggers liability. There the immediate purchaser of the manufacturer's assets, as well as a subsequent purchaser,[7] were both held potentially liable as successors. Clearly, the final purchaser did not cause the destruction of remedies against the original owner-manufacturer; but the transfer or acquisition or both destroyed such remedy. Responding to the argument that the first Ray justification is concerned solely with finding one viable defendant, the New Jersey Supreme Court said:
In so arguing [the intermediate owner] misinterprets the underlying purpose of this justification for the imposition of successor corporation liability. In Ray v. Alad, supra, the court was concerned not as much with the availability of one particular viable successor as it was with the unavailability of the original manufacturer by reason of its divestiture of assets and dissolution. [Ramirez, supra, 86 N.J. at 370-371.]
This language is strong evidence that our Supreme Court sees the transfer of assets and the manufacturer's unavailability to answer in damages[8] as the triggering circumstances and not the precise role of the transferee nor the form of the transfer.[9]
The Ninth Circuit has indeed taken a restrictive view of the first Ray justification, interpreting Ray to require proof that the alleged "successor" itself caused or contributed to the predecessor's demise. See, e.g., Nelson v. Tiffany Industries, Inc., 778 F.2d 533 (9 Cir.1985):
It is our view that the California Supreme Court's decision in Ray does not apply where there is a good faith dissolution in bankruptcy which is not *291 intended to avoid future tort claims against the predecessor. Under such circumstances, the successor corporation has not contributed to or caused the destruction of the plaintiff's remedies. On the record before us, however, it is not clear whether the district court considered the evidence offered by the plaintiff for the purpose of showing that Moody filed its petition pursuant to a collusive agreement with Tiffany. If the evidence shows that Tiffany induced Moody to file for bankruptcy to avoid future tort liability, the Ray exception to the general rule would be applicable. Because this critical factual issue was not considered or resolved by the district court, we must reverse the order granting summary judgment. [at 538.]
A trial court in the Third Circuit has criticized that view, finding that the California federal court in Nelson v. Tiffany "may have read the Ray criteria too narrowly by holding that [the] successor must have caused the loss of remedy...." Conway v. White Trucks, 692 F. Supp. 442, 453 (M.D.Pa. 1988). Under Ramirez, the destruction of plaintiff's remedy against the manufacturer occurs by virtue of the transfer of the assets of the product line, combined with the manufacturer's effective dissolution and the purchaser's continuation of the product line. The purchaser need not do more to satisfy the first Ray factor.
The second Ray justification, "the successor's ability to assure the original manufacturer's risk-spreading role," suggests no reason why a purchaser in bankruptcy is any less able to insure against contingent products liability claims than any other purchaser. Our Supreme Court has clearly expressed the intention to allow persons injured by defective products to recover against those who can best spread the risk of such injury. Ramirez, 86 N.J. at 350.
Finally, the third Ray justification is "the fairness of requiring the successor to assume a responsibility for defective products that was a burden `necessarily attached to the original manufacturer's good will being enjoyed by the successor in the continued operation of the business.'" Id. at 349, quoting Ray. Whatever arguments can be made under this justification would seem to turn on the nature of the "good will," and the extent to which it was actually "enjoyed by" the successor. It may be argued that a debtor in bankruptcy has less good will than a viable corporate seller, but that raises a fact question *292 that has to be analyzed on a case-by-case basis. It does not warrant the conclusion that a purchase in bankruptcy per se precludes successor liability. The New Jersey Supreme Court apparently found it "fair" to allow successor liability against one who purchases all or virtually all the assets of a business and who continues the product line.
One commentator, recommending the "product line continuity theory," implies that successor liability does not require transfer of all of the assets, but only those associated with the product line in issue. See Phillips, "Product Line Continuity and Successor Corporation Liability," 58 N.Y.U.L.Rev. 906, 917, 924 (1983).
Plaintiff alleges that defendant COPCO purchased all or virtually all of defendant C.O. Porter's assets and continued to produce the offending product line. Defendant submits, by way of affidavit,[10] the conclusory and hearsay statement of its president, that
Although I am without personal knowledge as to the percentage of assets COPCO, Inc., purchased from C.O. Porter Machinery Co., I am certain that C.O. Porter Machinery Co. sold a substantial portion of its assets to other entities, either shortly before or at around the same time as the bankruptcy.
This is insufficient to establish anything other than the virtually total transfer of assets. The purchase agreement, quoted above, seems to show a transfer of most assets to COPCO. To the extent the parties' papers suggest a question of whether defendant COPCO did purchase "all or substantially all" of C.O. Porter's assets, this is a fact question that cannot be resolved by summary judgment.
Nothing in Ramirez or Nieves supports the argument that a transfer in bankruptcy is to be shielded from exposure to successor liability.
*293 Defendant argues that bankruptcy law protects it in two respects. Despite the facial appeal of defendant's arguments, this court finds that neither applies.
First, defendant relies upon the order approving the sale of C.O. Porter's assets to COPCO:
The property is sold free and clear of all liens, claims (absolute or contingent) and encumbrances, with the interest of any parties asserting liens therein and claims and/or encumbrances thereon attaching to the proceeds thereof with the same validity and in the same order of rank and priority as said liens, encumbrances and claims now exist in said property.
That order is authorized by 11 U.S.C.A. § 363(f), which provides:
The trustee may sell property under subsection (b) or (c) of this section free and clear of any interest in such property of an entity other than the estate, only if [inter alia]
(1) applicable nonbankruptcy law permits sale of such property free and clear of such interest....
This section applies only to property subject to identifiable interests or liens of others, such as mortgagors, secured creditors, taxing authorities and the like. It is a condition or qualification of the general powers of the trustee in bankruptcy (under § 363(b) and (c)) to sell property of the estate. In other words, the trustee is generally permitted to sell property of the estate (under conditions not relevant here), except that if there is a specific interest of another in that property (not merely a general claim against the estate), the property can nevertheless be sold "free and clear" of the interest if nonbankruptcy law (including state law) would permit it.
It is apparent that § 363(f) does not address any of the issues directly involved in this case. The order issued under that section can only protect the purchaser of estate property against "any interest in such property." Plaintiff does not claim an interest in the purchased property, and the order does not affect plaintiff's claim against COPCO. See, e.g., Volvo White Truck Corp. v. Chambersburg Beverage, Inc., 75 B.R. *294 944, 948 (Bankr.N.D.Ohio 1987).[11]
Defendant further argues that plaintiff's claim, as part of a class of contingent claims identified in the course of the bankruptcy proceedings, was discharged as to C.O. Porter, and therefore cannot proceed against any purchaser of C.O. Porter's assets. However, where the corporate debtor does not survive and the "reorganization" becomes a liquidation, the order confirming the debtor's liquidation plan does not, in fact, discharge the debtor corporation. See 11 U.S.C.A. § 1141(d)(3). Additionally, 11 U.S.C.A. § 524(e) explicitly provides that:
discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt.
The disjunctive language of § 524(e) calls attention to an obvious difference between the successor's general liability for a debt of the seller, and an actual lien on the property acquired. No one in this case alleges that the property acquired was encumbered by any statutory or common law lien.
This section was apparently intended to make it clear that the obligations of a joint debtor, guarantor or surety would not be excused by the debtor's discharge. It is equally applicable to "any other entity" whose liability is secondary or vicarious.
When it is necessary to commence or continue a suit against a debtor in order, for example, to establish liability of another, perhaps a surety, such suit would not be barred. Section 524(e) was intended for the benefit of the debtor but was not meant to affect the liability of third parties or to prevent establishing such liability through whatever means required. [3 Collier, Bankruptcy (15 ed. 1988), § 524.01(3); footnotes omitted.]
One bankruptcy court has ruled contrary to this court's decision, at least where a reorganization occurred in bankruptcy. Volvo White Truck Corp. v. Chambersburg Beverage, Inc. (In re White Motor Credit Corp.), 75 B.R. 944 (Bankr.N.D. Ohio, 1987). The court in White was asked to enjoin a state court products liability suit on facts similar to ours. There, the *295 injury occurred within days after the bankruptcy sale of assets, but before confirmation of the debtor's plan for reorganization. That court held that preemption precluded a state court suit. In the instant case, a plan for liquidation, and not reorganization, was confirmed.[12]
The Ohio bankruptcy court also found that § 1141 (which defines a discharge under the code) precludes successor liability because the underlying liability has been discharged. That appears to be faulty reasoning. Section 1141(c), 11 U.S.C.A. § 1141(c), does not hold the purchaser harmless; it only frees the property from "claims and interest of creditors, equity security holders, and of general partners in the debtors." Even more significantly, § 1141(d)(3) explicitly provides that confirmation of a plan of liquidation (by contrast to reorganization) does not discharge a corporate debtor that discontinues business. Finally, § 1141(d)(1)(A) provides that the confirmation of a plan of reorganization "discharges the debtor from any debt that arose before the date of such confirmation...." Contrary to the White court, I do not find that that section discharges an unknown claim that was not a "debt" at the time.
The Fifth Circuit has held that, even if a bankruptcy proceeding could be reopened[13] to allow a products liability claim to be filed against the debtor, that jurisdiction would not extend to a claim based on an accident that occurred after the order approving the sale of assets. See In re Mooney Aircraft, Inc., supra, 730 F.2d at 373.
An accident that is waiting to happen because of a defective product in circulation is not very different from past exposure *296 to a toxin that may manifest injury in the future. For a persuasive argument against discharging unaccrued toxic tort claims that arise from prepetition activities of a debtor in reorganization, see Bibler, "The Status of Unaccrued Tort Claims in Chapter 11 Bankruptcy Proceedings," 61 Am.Bankr. L.J. 145 (1987). Cf. Zulkowski v. Consolidated Rail Corp., 852 F.2d 73 (3d Cir.1988) (former railroad that was not liquidated but reorganized in bankruptcy was not absolved of liability under FELA for asbestosis manifested after the reorganization).
In a case involving the same debtor as the Chambersburg case, a Pennsylvania federal district court reversed itself last year to deny plaintiffs the benefit of successor liability based upon the findings of the Ohio bankruptcy court. Conway v. White Trucks, Division of White Motor Corp., 692 F. Supp. 442 (M.D.Pa. 1988). The court recognized that the "product line" exception set forth in Ramirez had been adopted as the law of Pennsylvania, despite the district court's criticisms of that theory. Id. at 451-452. However, on reconsideration, the federal court distinguished Conway from Ramirez on its facts. White, the manufacturer, had come out of reorganization and was functioning. It had sold only the truck line involved in plaintiff's accident to Volvo. There had been insurance for such claims. The reorganization plan had provided a fund for individuals such as plaintiffs and the bankruptcy court had approved widely published notices to claimants of the deadlines for filing proofs of claims. Thus, the court implicitly found against plaintiffs because of a failure of the first and third Ray justifications for successor liability.
Volvo-White had little or nothing to do with the loss of the Plaintiffs' remedies against White Motor Corporation. While it is true that Plaintiffs' remedies against White Motor Corporation would have probably been lessened as a result of the bankruptcy proceedings, there is nothing in the record to establish that those remedies would be non-existent or severely restricted had a timely proof of claim been filed. To the contrary, the record clearly reflects that there was available insurance coverage and a special fund was set aside in the course of the reorganization to accommodate those in the position of the Plaintiffs. Sadly, however, the Plaintiffs for whatever reason lost their opportunity to take *297 advantage of those measures by failing to timely file a Proof of Claim. [Conway v. White Trucks, supra, 692 F. Supp. at 452.]
Conway and Chambersburg are distinguishable on their facts.
The Third Circuit has held that where an antitrust cause of action accrued prior to the reorganization consummation order (under the former Bankruptcy Act, 11 U.S.C.A. § 1 et seq., July 1, 1898, 30 Stat. 544, c. 541) that claim is discharged against the debtor and cannot be the subject of a subsequent suit against the reorganized corporation. In re Penn Central Transp. Co., 771 F.2d 762, 767 (3 Cir.1985). Compare Schweitzer v. Consolidated Rail Corp., 758 F.2d 936, 942 (3 Cir.1985), cert. den. 474 U.S. 864, 106 S.Ct. 183, 88 L.Ed.2d 152 (1985), where the circuit held that asbestos-related diseases which did not reveal themselves until after the consummation of reorganization were not "claims," were not discharged, and that injured railroad employees can sue even the reorganized corporation.
In the Penn Central decision, the court considered the due process implications of the kind of notice the claimants had. While the antitrust claimants tried unsuccessfully to distinguish themselves from "ordinary commercial" claimants, 771 F.2d at 768, clearly the notice that is fair to such entities is not necessarily so to an injured employee. More important, it was the reorganized corporation that emerged from the bankruptcy that was expressly protected by the discharge in the Penn Central case. That holding is not inconsistent with this court's ruling.
In a case similar to Penn Central, a bankruptcy court in Georgia denied successor liability. In re All American of Ashburn, Inc., 56 B.R. 186 (Bankr.N.D.Ga. 1986), aff'd on other grounds, 805 F.2d 1515 (11 Cir.1986) (damage arose after the petition but before the order approving sale). There are significant differences between All American and this case. There the individuals seeking to recover against the purchaser of the debtor's assets were actually aware of the pending bankruptcy proceeding and filed no claim therein. Instead, they went to state court, where defendants lost a motion for summary judgment *298 brought on account of the bankruptcy order of sale. The bankruptcy court in All American thereafter granted an injunction against plaintiffs' pursuing a state court action, saying it was plaintiffs' own fault that they received no notice of the sale of assets. The court distinguished In re Schweitzer, supra, and Mooney Aircraft Corp. v. Foster (In re Mooney Aircraft, Inc.), 730 F.2d 367 (5th Cir.1984) (personal injury suit arising out of air crash years after the bankruptcy sale of assets could not be enjoined by bankruptcy court). The Georgia bankruptcy court then unequivocally held that:
its Orders approving the sales of assets to ALS are final and not subject to collateral attack. [56 B.R. at 190.]
All American went through reorganization, not liquidation. Thus, All American turns on several distinguishing factors: timing, the claimant's actual knowledge of the bankruptcy, and the confirmation of a reorganization plan.[14] However, to the extent it turns on a finding that an order approving sale under 11 U.S.C.A. § 363 on its face bars successor liability, this court disagrees.
Defendant argues that this plaintiff, whose injury predated a bankruptcy order that allowed notice of claims like plaintiff's and actually provided a formula for partial satisfaction of such claims, cannot recover because he filed no such notice of claim.[15] But see In re Harbor Tank Storage Co., 385 F.2d 111 (3d Cir.1967) (creditor's actual knowledge of the pendency of the *299 reorganization case does not impose an affirmative obligation on the creditor to file a claim where no notice was given by the trustee). However, defendant presents no evidence that plaintiff would have recovered any sum, much less the full measure of his damages, by filing. If anything, these facts emphasize that bankruptcy epitomizes the destruction of plaintiff's remedies against the original manufacturer. To the extent that successor liability was adopted as an intentional expansion of the protection afforded to those persons injured by defective products whose manufacturers are no longer in business, bankruptcy presents a stronger and not a weaker case for its application.
One might question whether purchasers in bankruptcy should be subject to the differing laws of the 50 states on successor liability, or whether bankruptcy sales require uniformity on this issue. However, assets sold in bankruptcy are routinely subject to mortgages, security interests and other liens determined by the laws of the several states, without unduly interfering with the administration of the bankruptcy law or infringing on the supremacy of federal law.
The bankruptcy court in the District of New Jersey has laid out the constitutional basis for the preemption doctrine in Matter of Borne Chemical Co., Inc., 54 B.R. 126 (Bankr.D.N.J. 1984):
The United States Constitution, Article VI, clause 2, provides in pertinent part that "[t]his Constitution, and the Laws of the United States, which shall be made in pursuance thereof ... shall be the supreme Law of the Land ..." The Constitution, Article 1, § 8, clause 4 authorizes Congress [t]o establish ... uniform Laws on the subject of Bankruptcies throughout the United States." The present Federal Bankruptcy Law is derived from the above grant of authority. [at 129.]
Citing Perez v. Campbell, 402 U.S. 637, 91 S.Ct. 1704, 29 L.Ed.2d 233 (1971) and Pacific Gas and Electric Co. v. State Energy Resources Conservation and Development Comm'n., 461 U.S. 190, 103 S.Ct. 1713, 1722, 75 L.Ed.2d 752 (1983), the *300 bankruptcy judge in Borne described the test applicable here.[16] That is whether, after determining the purpose of the Bankruptcy Code and the state law, the state law as applied will have "the effect of interfering with the objectives underlying the federal law." 54 B.R. at 129-130. Borne held that ECRA was not preempted by the code.
The two major purposes of the code, according to Borne, are: (1) to effect a fair and equitable distribution of the debtor's property among its creditors, and (2) to enable debtors to get a "fresh start". Id. at 131. Neither purpose is derogated by including bankruptcy sales within the Ramirez doctrine. See also Midlantic National Bank v. N.J. Dept. of Environmental Protection, 474 U.S. 494, 106 S.Ct. 755, 88 L.Ed.2d 859 (1986) (a trustee in bankruptcy cannot abandon property in contravention of a state law, specifically ECRA, reasonably designed to protect public health or safety from an identified hazard).[17]
Nothing about the application of successor liability to this case conflicts with the bankruptcy orders involving C.O. Porter's estate or sale to COPCO. Nor does the availability of successor liability have the potential for such conflict or interference in other cases. Thus, there is no preemption problem that would preclude Ramirez from applying here.
Defendant may be implicitly arguing that the third Ray factor, fairness, is not met in the circumstances of this case. Certainly defendant's liability under Ramirez, if any, is entirely vicarious. Plaintiff's proofs on his strict liability claims would go to the design, manufacture or inadequate warnings provided *301 by the bankrupt manufacturer, C.O. Porter. Plaintiff does not allege that the purchaser of the assets did, or failed to do, anything that contributed to his injury. But that is equally true in Ramirez, Nieves and Ray. Defendant does not claim that this plaintiff recovered for any of his injury from the estate in bankruptcy, or even that plaintiff had notice of the bankruptcy proceeding in order to file a claim.
Successor liability is, by definition, vicarious liability, and defendant points to no essential difference created by the bankruptcy or the timing of plaintiff's accident. Successor liability as described by Ramirez is a form of secondary, vicarious liability. In other words, COPCO's liability turns on its relationship to the original manufacturer, and not on its own acts or omissions with regard to the product. In every form of vicarious liability, the blameworthy behavior or status of the primarily liable person must be established as a prerequisite to recovery against the secondarily liable person. However, there are several circumstances where the primarily liable defendant is insulated in some way from judgment (even by discharge in bankruptcy) without destroying the right to recover against the secondarily liable person.
Perhaps the most troublesome aspect of the "product line" theory of successor liability is that in most cases of vicarious liability, the secondarily liable party has a direct relationship to the obligee. This is true, for example, in the case of a guarantor's liability on a loan, a surety's on a contract, and a principal's responsibility for the acts of an agent who has either been authorized or given apparent authority to act on the principal's behalf. Closer examination of Ramirez reveals that the Court implicitly found the "successor's" role in acquiring the assets and product line, and in taking advantage of the predecessor's good will and product development, to be sufficient substitutes for direct contact with third-person claimants.
Where an injury occurs prior to the closing of a bankruptcy proceeding, and the injured party seeks to have its claim *302 adjudicated, it appears there is discretion in the district court in which the bankruptcy is pending to: hear the case, refer it to the bankruptcy court, order it heard in the district court where the claim arose,[18] or abstain and allow the claim to proceed in state court. See generally 28 U.S.C.A. § 157, § 1334, § 1471. See also Thompson v. Magnolia Petroleum Co., 309 U.S. 478, 60 S.Ct. 628, 84 L.Ed. 876 (1940) (abstention under 28 U.S.C. § 1334(c)).
In the present case, the injury did occur prior to the approval of the debtor's liquidation plan and the closing of the bankruptcy case. We must ask two questions: (1) was plaintiff required to seek adjudication of this claim in the federal district court? (2) Does the answer to the first question depend upon actual notice to plaintiff of the bankruptcy proceeding, or is plaintiff charged with notice? Both must be answered in the negative.
On the facts here, due process requires more than publication to cut off an injured employee's right to pursue a products liability claim against a successor to the assets and product line of the manufacturer. See generally Mullane v. Central Hanover Trust Co., 339 U.S. 306, 315-17, 70 S.Ct. 652, 657, 94 L.Ed. 865, 874-75 (1949). An employee who is injured by machinery on the job has little reason to know the status of the manufacturer of that machinery, or to read the journals where "notices" may be published. At the time plaintiff was injured in August 1984, COPCO had already purchased the *303 assets of C.O. Porter. A chapter 11 (reorganization) proceeding was pending. By May 1985, reorganization had apparently been abandoned and a plan of liquidation was approved. It was that plan that attempted to provide for partial payment on personal injury claims such as plaintiff's. See footnote 3 above. There is no record that anyone gave notice of the bankruptcy proceeding to plaintiff. That may be because plaintiff had not yet filed suit. Due process would appear to require more before terminating rights against the successor.
Federal law grants non-exclusive jurisdiction to the district court and its bankruptcy court. By providing in 28 U.S.C.A. § 157 for the district court itself to decide whether and where to hear the case, we must ask whether Congress has preempted the choices of jurisdiction and venue, or whether there is room for this state court to make that decision. Where abstention is discretionary, concurrent state court jurisdiction is contemplated. See 28 U.S.C.A. § 1334(c); Thompson v. Magnolia Petroleum Co., 309 U.S. 478, 60 S.Ct. 628, 84 L.Ed. 876 (1940). The exercise of that jurisdiction, in the absence of a conflicting federal court decision, is therefore not preempted. Here, defendant COPCO has never sought to remove the matter to the federal court, nor has it sought relief in the bankruptcy court where the petition was filed. In fact, defendant's letter brief of March 29, 1989, argues that
... the question of jurisdiction raised by the court has already been settled and that having discharged the bankrupt and provided for claims of this nature, the Bankruptcy Court has no further jurisdiction in this matter.
An extensive analysis of bankruptcy jurisdiction and procedure is beyond the scope of this decision. However, this court is satisfied that it is not overstepping the limits set by the Supremacy Clause in allowing the New Jersey case to proceed.
This denial of summary judgment does not constitute a finding that defendant COPCO is liable as a successor for any products liability claim plaintiff may be able to prove. Plaintiff still bears the burden of proof with respect to this defendant's status. As a mixed question of law and fact, successor status *304 is for the court and not a jury. Cf. Lopez v. Swyer, 62 N.J. 267, 272, 275, n. 3 (1973) (applicability of discovery rule).[19]
NOTES
[1] The "product line" theory of successor liability is a minority position, applicable only in a few states, including New Jersey, California, Pennsylvania, and, arguably, Massachusetts and Colorado. See Ray v. Alad Corp., 19 Cal.3d 22, 136 Cal. Rptr. 574, 560 P.2d 3 (1977); Dawejko v. Jorgensen Steel Co., 290 Pa.Super. 15, 434 A.2d 106 (1981); Roy v. Bolens Corp., FMC, 629 F. Supp. 1070 (D.Mass. 1986), citing slip opinion in Perez v. Amsted Industries, Inc., No. 57728 (Mass. Superior Ct., April 20, 1984); and Hickman v. Thomas C. Thompson Co., 592 F. Supp. 1282 (D.Colo. 1984) (predicting Colorado Supreme Court would adopt the "product line" theory of successor liability).
[2] In exchange for the payment of $335,000 in cash, defendant COPCO received all of C.O. Porter's inventory, engraving drawings, manufacturing records and documents, sales materials, including customer lists, manufacturing equipment, trademarks, copyrights and trade names, except for those related to certain woodworking equipment not connected with the product line in this case. The corporate name was not included in the sale. The purchase agreement purports to list all known litigation. Since the agreement was dated February 28, 1983, it could not have listed any suit related to the August 1984 accident.
[3] The amended plan for liquidation provided for a class of products liability tort claims, "class 7," defined as:
This class consists of all unliquidated claims held by persons or entities having claims against the Debtor as a result of injuries related to equipment and/or parts and accessories manufactured and/or repaired by the Debtor. Holders of these claims consist of both personal injury plaintiffs, and other co-defendants of the Debtor claiming subrogation, indemnification, and/or contribution from the Debtor. Claims for subrogation, indemnification, and/or contribution are included within this class, notwithstanding the fact that such claims may be subject to disallowance or subordination under Sections 502(e), 509(c) and 510 of the Code. Such class includes all claims whether they are related to insured or uninsured injuries.
Total assets of $370,000 were to be used to pay off, on a fractional basis, the class-7 claims.
[4] The May 2, 1985 order provides, in part,
IT IS FURTHER ORDERED that upon entry of this Order, the automatic stay is hereby lifted and personal injury plaintiffs whose claims are covered by insurance are free to prosecute their causes of action in the court of competent jurisdiction, but that their sole recovery shall be from such insurance.
There is no insurance coverage for plaintiff's accident.
[5] There is an underlying concern in any corporate bankruptcy that the debtor not be able to walk away from its debts and allow an alter ego to acquire the benefits of the business with none of the burdens. This is a proper focus of examination by a bankruptcy court before approving a sale of the bankrupt's assets. At least one court has recognized the right of a plaintiff seeking to recover on successor liability to reexamine the characteristics of the purchase long after the bankruptcy court order approving that sale. See Nelson v. Tiffany Industries, Inc., 778 F.2d 533, 538 (9 Cir.1985) (applying California law). But see In re All American of Ashburn, Inc. 56 B.R. 186, 190 (Bankr.N.D.Ga. 1986), aff'd on other grounds 805 F.2d 1515 (11 Cir.1986).
[6] Neither Ramirez, Nieves nor Ray explicitly addresses the case where the acquisition is part of the business or business assets, such that the alleged successor continues the product line involved in the inquiry but not all of the business of the predecessor. In Kline v. Johns-Manville, 745 F.2d 1217 (9 Cir.1984), the court held that California's successor liability does not apply to the partial acquisition of an asbestos line of a manufacturer who filed for a reorganization 20 years later.
[7] In Nieves it was the intermediate purchaser who challenged successor liability.
[8] Where the predecessor continues to be a viable entity, the first Ray justification would be nullified. LaPollo v. General Electric Co., 664 F. Supp. 178, 184 (D.N.J. 1987) (applying New Jersey law, and holding that, "the New Jersey Supreme Court ... would decline to impose liability on [the purchaser of a product line] in light of GE's continued viability.")
[9] Justice Schreiber's concurring opinion in Ramirez, however, stresses the successor's role:
The central thesis of this methodology is premised on the elimination by the successor of an effective remedy. [86 N.J. at 358.]
[10] The affidavit of John Northway dated August 10, 1988 is attached to defendant's notice of motion filed August 12, 1988.
[11] The court in Volvo White Truck Corp. v. Chambersburg Beverage, Inc., recognized that the Ramirez rule employs "successor liability ... to prevent avoiding product liability by a sale of assets." Id. at 950.
[12] The court in Volvo White stated:
... the issue to be decided is whether state successor liability law is preempted by federal law to the extent the claims underlying the successor's liability have been discharged under a plan of reorganization. [75 B.R. at 950.]
[13] 11 U.S.C.A. § 350 permits reopening under limited circumstances.
[14] All American is based in part upon the theory that successor liability interferes with the priority of claims under the Bankruptcy Code. That is a misconception. The source of the injured plaintiff's recovery, if allowed, will be the one who acquired the product line. This does not diminish the recovery of others whose claims are in a different class.
[15] If plaintiff had been aware of the bankruptcy and filed a claim; and if the bankruptcy court had estimated the value of the contingent claim as it can under 11 U.S.C.A. § 502(c)(1); and if the plaintiff's unsecured claim had been paid at some fraction of its value along with other unsecured debts; the court's ruling would be consistent with such a plaintiff seeking successor liability to provide a complete remedy.
[16] Borne determined that the Bankruptcy Code did not preempt a New Jersey statute, the Environmental Cleanup Responsibility Act ("ECRA"). We are concerned with New Jersey common law of successor liability, rather than with a state statute.
[17] Midlantic did not arise under § 363(f) or § 524(e) of the Bankruptcy Code, but rather under § 554(a), permitting the trustee to abandon certain property.
It can be argued that Ramirez is reasonably designed to protect health or safety from an identified hazard as well: the defective product.
[18] This alternative (28 U.S.C.A. § 157(b)(5)) suggests choice of law relevant to the successor liability issue.
The Michigan district court could have ordered a claim such as plaintiff's to be heard in the District of New Jersey, or could have abstained in favor of the New Jersey court proceeding. Whether New Jersey's law of successor liability would apply is a choice of law question which was never raised in this New Jersey lawsuit. Michigan follows the "continuity of enterprise" theory of successor liability. See Turner v. Bituminous Cas. Co., 397 Mich. 406, 244 N.W.2d 873 (1976). Ramirez rejects the Turner approach. 86 N.J. at 347.
[19] The procedure described in Conway v. White Trucks, supra, 692 F. Supp. at 447 makes sense. There "the parties agreed to adjudicate the Plaintiffs' successor liability claim without a jury" prior to trial of the products liability claim itself. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543851/ | 567 A.2d 1331 (1990)
DISTRICT OF COLUMBIA, Appellant,
v.
Daniel BETHEL, Appellee.
Nos. 88-1045, 88-1626.
District of Columbia Court of Appeals.
Argued October 4, 1989.
Decided January 5, 1990.
*1332 Edward E. Schwab, Asst. Corp. Counsel, with whom Frederick D. Cooke, Jr., Corp. Counsel at the time the brief was filed, and Charles L. Reischel, Deputy Corp. Counsel, Washington, D.C., were on the brief, for appellant.
Samuel M. Shapiro, with whom Cassandra P. Hicks, Rockville, Md., was on the brief, for appellee.
Before STEADMAN, SCHWELB, and FARRELL, Associate Judges.
SCHWELB, Associate Judge:
The District of Columbia appeals on several grounds from a million dollar judgment entered upon a jury verdict in favor of Daniel Bethel, an inmate at the Central Facility at Lorton prison. Finding no error, we affirm.
I
Bethel was severely injured when he was stabbed by another inmate, Carter, with a "shank."[1] Bethel was asleep in his dormitory *1333 at the time of the stabbing, which apparently resulted from a relatively minor incident between Carter and Bethel two days earlier. On that occasion, Bethel had stood up for an older inmate who was working in the prison bathhouse with him and who had refused to give Carter an extra portion of soap. There was, at most, a minor skirmish between Bethel and Carter, and a correctional officer who was present took no action.
At trial, Bethel asserted that the District had negligently caused Bethel's injuries by failing to control inmate movement, by allowing inmates to have authority over other inmates, by failing to control inmates' access to weapons, by failing to provide proper supervision of inmates by officers, by unreasonably delaying its response to an emergency, and by operating an overcrowded facility. Both parties presented expert testimony. James Murphy, Bethel's expert penologist, testified that the District had failed to adhere to the applicable standard of care in each of these six respects. The District's expert, James Black, concurred in many but not all of Mr. Murphy's major conclusions.
II
The District claims that Bethel did not establish the proper standard of care. It contends that Mr. Murphy based his testimony largely on the American Correctional Association's Standards for Adult Correctional Institutions (2d ed. 1981), and asserts that "ACA standards are not negligence standards." The District does not, however, challenge Mr. Murphy's expertise. Rather, it contends in effect that his testimony was legally insufficient because, according to the District, he relied on improper materials to guide his expert opinion. The District cites no authority in support of its contention that a qualified expert's opinion can be undermined in this way. In general, although an opinion rises no higher than the level of the evidence and the logic on which it is predicated, it is for the jury, with the assistance of vigorous cross-examination, to measure the worth of the opinion. United States v. Hill, 62 F.2d 1022, 1025 (8th Cir. 1933); see also Singer Co. v. E.I. du Pont de Nemours & Co., 579 F.2d 433, 442-43 (8th Cir. 1978).[2]
In any event, in reaching his conclusion that the District had violated the applicable standard of care, Mr. Murphy relied not only on the ACA standards, but also on the District's policies and procedures and on his own considerable experience in the field of penology. Bethel never argued, nor did the judge instruct the jury, that violation of an ACA standard was negligence per se, and there is no contention that the charge to the jury was improper.
In Rivers v. State, 142 Misc.2d 563, 537 N.Y.S.2d 968, 970 (Ct.Cl. 1989), relied on by the District, the court described the ACA standards as "normative goals to be striven for, not the prevailing medical standards of any given community." The court held in Rivers that medical malpractice could not be established by simply introducing, in lieu of expert medical testimony, an ACA standard requiring the forwarding of medical records to a physician who operates on the inmate at a facility outside the prison. Rivers has no application to the present case, in which expert testimony was introduced and the plaintiff relied on far more than the bare ACA standards. We therefore find the District's argument based on Rivers unpersuasive.
III
The District contends that the ACA standards are inconsistent with the consent decree in Twelve John Does v. District of Columbia, No. 80-2136 (D.D.C. April 28, 1982). This was a settlement of constitutional and related claims brought in a class action against the District by a number of prisoners at the Lorton facility. Bethel was confined at Lorton when the suit was filed, and was thus a member of the plaintiff class.
*1334 No argument was made to the trial court about the Twelve John Does decree. Indeed, the decree was mentioned once by the District at trial, at which time Bethel's counsel interposed no objection, but argued that its use by the District would open the door to other evidence about it, a contention with which the judge agreed. Apparently for tactical reasons, the District never again brought up the decree in the trial court. Nevertheless, on appeal, the District filed an appendix of materials from the Twelve John Does case and now contends that we should rely on it in order to hold that Bethel has not established the proper standard of care.
Absent manifest injustice, a litigant may not assert one theory at trial and another on appeal. D.D. v. M.T., 550 A.2d 37, 48 (D.C. 1988); Hackes v. Hackes, 446 A.2d 396, 398 (D.C. 1982). "Questions not properly raised and preserved during the proceedings under examination, and points not asserted with sufficient precision to indicate distinctly the party's thesis, will normally be spurned on appeal." Miller v. Avirom, 127 U.S.App.D.C. 367, 369-70, 384 F.2d 319, 321-22 (1967); D.D., supra, 550 A.2d at 48. In the present case, consideration of the Twelve John Does litigation after Bethel was precluded from making an appropriate record with respect to it in the trial court would be patently unfair to him. Accordingly, we decline the District's invitation to venture outside the trial record and consider facts and contentions never presented to the trial judge.
IV
Relying on District of Columbia v. White, 442 A.2d 159, 165-66 (D.C. 1982), the District argues that the plaintiff failed to prove the applicable standard of care with respect to several of the theories on which he predicated his claim of liability. See also Murphy v. United States, 209 U.S. App.D.C. 382, 391, 653 F.2d 637, 646 (1981). The District goes on to argue that "a new trial must be granted if any of plaintiff's several theories of liability was improperly presented to the jury, because one cannot determine on which of the theories the jury relied in reaching its verdict." The District did not request that the trial judge proceed by special verdict or interrogatories to the jury, nor did it take any other steps in the trial court to avoid the problem of which it now complains.
We need not decide, however, whether the District's silence below forecloses the contention which it now presents on appeal. Mr. Murphy's testimony, when viewed, as it must be, in the light most favorable to Bethel,[3] supports the claim that the District violated the applicable standard of care in each of the enumerated respects. Mr. Black's testimony substantially corroborates Mr. Murphy's on several issues. We are satisfied that none of Bethel's theories was improperly presented to the jury.
There is no question that some of the theories of negligence on which Bethel relies present complex issues relating to proper prison administration. One, in particular, merits additional discussion. The District argues that ACA Standard 2-4205, which proposes that prisons adopt written policies and procedures providing that "no inmate or group of inmates is given control or authority over other inmates," was intended to address such serious problems as arming "trusties" and using them to guard other inmates at penal facilities.[4] Standard 2-4205, the District therefore insists, cannot properly be utilized as a predicate for a finding that it was negligent in allowing Bethel to supervise other prisoners with respect to such comparatively mundane activities as dispensing soap.
There was testimony in this record, however, from which the jury could conclude that the control and authority given to Bethel were quite substantial. Bethel swore in his answers to interrogatories, which were read into the record, in part, by counsel for the District, that he made all the *1335 decisions in the bathhouse. He also testified that
[t]here's no place in Lorton that police run. That job is given to the inmates. That job was given to me. It was my responsibility to make sure that everything in the bathhouse was done.
Bethel also claimed that he had possession of the key to the bathhouse and opened and closed the facility without staff supervision.
James Murphy, the plaintiff's expert witness, testified in response to a hypothetical question that it was not proper penological practice to assign such authority to an inmate. James Black, the District's expert, agreed. Given the testimony as to the extensive authority which was said to have been given to Bethel and the opinions of both expert witnesses, we cannot agree with the District that the evidence on this issue was insufficient to go to the jury.
We emphasize, however, that we base our conclusion to this effect solely on the present record, as developed in this litigation by Bethel and the District. Lest our opinion be misunderstood, we do not adopt or articulate any general rule, and especially no rule conclusive on other litigants on a different record, that it constitutes negligence per se to permit one prisoner to exercise any incidental control over what another prisoner may receive. Nothing in this opinion should be construed, for example, to suggest that it would be negligence on the part of the District to permit a prisoner who is working on the "chow line" to refuse another inmate's demand for a double portion of dessert, or that the District is required to engage the services of civilians for the numerous jobs which inmates are routinely called upon to perform.[5]
V
One of the District's defenses at trial was that Bethel was contributorily negligent. The District argued that Bethel had slapped Carter during the two men's altercation, and that he therefore should have known that he was in danger of retaliation. Accordingly, says the District, Bethel should have requested protective custody or taken some other step to obtain protection from the institution, and his failure to do so constituted contributory negligence which proximately caused his injuries. This theory was not without its problems,[6] and it was rejected by the jury in its verdict.
In connection with the defense of contributory negligence, the District presented the testimony of Correctional Officer Adrienne L. Poteat, who had investigated the assault. Officer Poteat testified that Bethel told her that he had slapped and shoved Carter during the altercation between the two men. On cross-examination, counsel for Bethel asked a number of questions *1336 which, according to the District, cast doubt on the credibility of Officer Poteat's account.[7] On redirect examination the District sought to introduce as a prior consistent statement Officer Poteat's notes, in which she quoted Bethel as having acknowledged, with an obscene reference to Carter, that he had slapped and pushed him.
In general, prior consistent statements are inadmissible to bolster the testimony of an unimpeached witness, Williams v. United States, 483 A.2d 292, 296 (D.C. 1984), cert. denied, 474 U.S. 906, 106 S.Ct. 275, 88 L.Ed.2d 236 (1985), for repetition does not imply veracity. Reed v. United States, 452 A.2d 1173, 1180 (D.C. 1982), cert. denied, 464 U.S. 839, 104 S.Ct. 132, 78 L.Ed.2d 127 (1983). An exception to this rule permits the introduction of a prior consistent statement to rehabilitate a witness whose credibility has been undermined "by a specific suggestion of fabrication or of a motive to lie." Williams, supra, 483 A.2d at 296; see also Sweat v. United States, 540 A.2d 460, 462 (D.C. 1988); Rease v. United States, 403 A.2d 322, 328 n. 7 (D.C. 1979). The trial judge has broad discretion with respect to the admission or exclusion of prior consistent statements. United States v. Hamilton, 689 F.2d 1262, 1273 (6th Cir. 1982), cert. denied, 459 U.S. 1117, 103 S.Ct. 753, 754, 74 L.Ed.2d 971 (1983); see Sweat, supra, 540 A.2d at 464.
In the present case, we think the trial judge could quite reasonably conclude that there was no specific suggestion of fabrication or of a motive to lie in counsel's cross-examination of Officer Poteat. Moreover, Officer Poteat's report, which was admitted into evidence, contained essentially everything which was in her notes, except for Bethel's alleged profanity. Consequently, admission of the notes would have been cumulative.
A trial judge has considerable discretion with respect to the admission or exclusion of cumulative evidence. See generally I. & A. Gard, JONES ON EVIDENCE § 1.5 (6th ed. 1972 & Supp. 1989), and authorities there cited. Evidence which adds little of probative value to the record may be excluded in order to avoid a waste of time, Mitchell v. Keith, 752 F.2d 385, 392 (9th Cir.), cert. denied, 472 U.S. 1028, 105 S.Ct. 3502, 87 L.Ed.2d 633 (1985), or, as Justice Holmes put it more than a century ago, as "a concession to the shortness of life." Reeve v. Dennett, 145 Mass. 23, 28, 11 N.E. 938, 943-44 (1887). There was no abuse of discretion on this record.
VI
The District contends that Bethel's attorney misstated the evidence during closing argument, and that it is therefore entitled to a new trial on the issue of damages. Specifically, the District faults opposing counsel for arguing that both expert witnesses agreed that Bethel had a 75% disability, whereas in fact, according to the District, its own expert testified that Bethel had only a 25% disability.
At the conclusion of the presentation by Bethel's own attorney, counsel for the District asked to approach the bench. He then told the judge that according to the expert's report, "Mr. Bethel is 75 percent normal, not 75 percent disabled. I would like Mr. Shapiro to correct that representation to the jury." Counsel also attempted to allude to his own pretrial conversations with the expert, but was not permitted to do so by the judge. The judge stated that "the testimony was that it was a 75 percent deficit, as I recall,"[8] but that counsel could *1337 "of course" argue the contrary, if counsel's recollection was different. Counsel later argued to the jury as follows:
You heard Mr. Shapiro say that Dr. Barber [the District's expert] has stated that Mr. Bethel is 75 percent disabled. Dr. Barber has submitted a report, and his report will speak for itself. That is not my recollection as to Mr. Bethel's testimony. However, I would leave that to your judgment as to the degree of disability that Mr. Bethel may have, based on Dr. Barber's assessment.
The judge instructed the jury that statements of counsel are not evidence, and that if he or counsel had made any reference to the evidence which did not coincide with the jurors' recollection, then "it is your memory which should control during your deliberations."
In evaluating the District's position on appeal, it is important to emphasize, paraphrasing Irick v. United States, 565 A.2d 26, 33 (D.C. 1989), that "although [the District's] complaint is primarily with [Bethel's attorney], it is our function to review the record for legal error or abuse of discretion by the trial judge, not by counsel." The only relief ever requested by the District was that Bethel's attorney be directed to correct his allegedly erroneous statement in front of the jury. The District never demanded a mistrial, nor did it object to the trial judge's resolution of the issue to allow counsel for the District to state his contrary recollection as insufficient. A litigant cannot obtain from an appellate court relief broader and more drastic than that sought in the trial court. D.D. v. M.T., supra; see also Prokey v. Hamm, 91 N.H. 513, 517, 23 A.2d 327, 330 (1941) (where counsel objected to adversary's statement in argument as improper, but requested no relief from the court when opposing counsel explained the basis for the statement, "the situation presents no question of law for us to pass upon"); Congiardo v. Bordenaro, 106 Ill.App.2d 374, 374-75, 245 N.E.2d 884, 885 (1969) (misstatement of testimony of witness by counsel in argument to jury did not require reversal where attorney was merely stating his recollection of testimony and it was for jury to determine what had been testified to).[9]
In Simpson v. Stein, 52 App.D.C. 137, 139, 284 F. 731, 733 (1922), it was held that to warrant reversal of a judgment because of improper argument to the jury, the court must be satisfied not only that there was misconduct by counsel but also that, after objection,
the court, by failing to apply appropriate disciplinary measures or to give suitable instructions, left the jurors with wrong or erroneous impressions, which were likely to mislead, improperly influence, or prejudice them to the disadvantage of the defendant.
Accord, Meyer v. Capital Transit Co., 32 A.2d 392, 393 (D.C. 1943). As the Supreme Court explained in a case decided in the last century,
[i]f every remark made by counsel outside of the testimony were ground for a reversal, comparatively few verdicts would stand, since in the ardor of advocacy, and in the excitement of trial, even the most experienced counsel are occasionally carried away by this temptation.
Dunlop v. United States, 165 U.S. 486, 498, 17 S.Ct. 375, 379, 41 L.Ed. 799 (1897).[10]
If the District's expert accidentally misspoke, then this is certainly unfortunate. Nevertheless, on this record, the District has failed to prove misconduct, or a proper objection to the court's ruling, or inadequate *1338 action by the trial court, or prejudice. Counsel for the District was permitted to counter his adversary's understanding of the evidence with his own, and the lack of clarity in the testimony of its own expert, see note 8, supra, must be laid at the feet of the District. Dr. Barber's report was admitted into evidence, and the jury was able to examine it. The judge properly instructed the jury. Reversal would consequently be inappropriate.
VII
For the foregoing reasons, the judgment appealed from is hereby
Affirmed.
NOTES
[1] A shank is a knife-like stabbing device. According to the testimony, a large number of prisoners at Lorton have shanks.
[2] The judge may, of course, exclude expert testimony if he believes that an opinion based upon particular facts cannot be grounded upon those facts. E. CLEARY, McCORMICK ON EVIDENCE § 13, at 34 (3d ed. 1984).
[3] See, e.g., Bauman v. Sragow, 308 A.2d 243, 244 (D.C. 1973) (per curiam).
[4] See, e.g., Hutto v. Finney, 437 U.S. 678, 682 n. 6, 98 S.Ct. 2565, 2569 n. 6, 57 L.Ed.2d 522 (1978) and Gates v. Collier, 501 F.2d 1291, 1307 (5th Cir. 1974), for descriptions of such practices.
[5] The causal nexus between Bethel's injuries and some of the claims of negligence might arguably be viewed as somewhat attenuated. With the single exception discussed below, however, the District has not challenged on appeal the sufficiency of the proof of causation, nor has it asserted that the chain was broken by Carter's intervening criminal act or questioned the amount of damages awarded.
The District does argue, however, that Bethel did not prove any injury from its allegedly unreasonable delay in its response to the emergency. Obviously, since that delay came after the stabbing, not all of Bethel's injuries or suffering could be attributed to it, and it blinks reality to suggest that the jury's entire award could have been based on this alleged violation of proper penological standards.
Had the District requested an instruction to the effect that damages for the allegedly delayed response must be restricted to any incremental pain and suffering or other damage attributable to that delay, rather than to the stabbing, it might well have been entitled to one. No such request was made, however, and we cannot say that, as a matter of law, the alleged delay could not have added to Bethel's suffering.
[6] The encounter between the two inmates was witnessed by an officer who obviously did not view it as requiring any action. There was also testimony that Bethel and Carter resolved their differences immediately after the incident. In any event, the suggestion that every minor altercation between inmates warrants a request for protective custody, or some equivalent measure, and that an inmate is negligent in not requesting such protection even when the underlying incident was witnessed by a correctional officer who took no action, is one which a reasonable jury might well reject. The District's own expert testified unfavorably to the District on this issue.
[7] The District claims in particular that impeachment of Officer Poteat occurred when counsel for Bethel attempted to establish that if Bethel had slapped Carter, then the correctional officer who was present would have written a disciplinary report citing Bethel for misconduct.
[8] The record with respect to what the District's expert, Dr. Barber, said, and especially as to what he meant, is somewhat cloudy. Dr. Barber initially testified on direct examination that "I estimated [Bethel's] disability to be around 75 percent." He repeated the same estimate a few moments later. He also indicated that the disability would be greater if Bethel were a laborer rather than a clerical worker. On cross-examination, however, when asked his opinion of the impairment of Bethel's ability to work as a file clerk, Dr. Barber responded: "Yes. As I estimated, for 20 impaired by 25 percent." Counsel for the District never cleared up the apparent discrepancy. Dr. Barber's written report, which was received in evidence, states in pertinent part: "Disability 11.08 (spinal cord with motor involvement of two extremities.) Estimated 75% of normal. Could work as file clerk."
We think that the judge's recollection of the testimony was not clearly erroneous, and that Bethel's counsel had a bona fide basis for making his argument.
[9] This decision was published in abstract only.
[10] The phenomenon on which the Court was commenting has not disappeared in the ninety-two years that have elapsed since Dunlop was decided. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543857/ | 55 B.R. 945 (1985)
In re BEKER INDUSTRIES CORP., Debtor.
In re BEKER PHOSPHATE CORPORATION, Debtor.
Bankruptcy Nos. 85 B 11709, 85 B 11710.
United States Bankruptcy Court, S.D. New York.
December 20, 1985.
*946 Rosenman, Colin, Freund, Lewis & Cohen by Paul L. Bindler, New York City, for Seidman Capital Corp. and Magten Asset Capital Corp.
Breed, Abbott & Morgan by C. MacNeil Mitchell, New York City, for Marine Midland Bank, N.A.
Bishop, Liberman & Cook by Robert Miller, David Strumwasser, New York City, for Jessup & Lamont Capital Corp.
Kronish, Lieb, Weiner & Hellman by William J. Rochelle, III, Sheri L. Josephs, New York City, for debtors-in-possession.
Weil, Gotshal & Manges by Ellen Werther, New York City, for National Bank of Canada, Commercial Credit Business Loans, Inc. and Commercial Credit International Banking Corp.
Wachtel, Lipton, Rosen & Katz by Chaim Fortgang, New York City, for Banks of Boston, N.A.
Strook & Strook & Lavan by Bonnie Schindel, Lawrence Handlesman, New York City, for Official Creditors Committee.
Harold Jones by Harold Jones, John Campo, New York City, for U.S. Trustee.
Donna Moore, New York City, for S.E.C.
*947 DECISION AND ORDER[*]
HOWARD C. BUSCHMAN, III, Bankruptcy Judge.
Seidman Capital Corporation and Magten Asset Management Corporation seek an order pursuant to 11 U.S.C. 151102(a) and (b) (1984) directing the United States Trustee to appoint a special committee composed of holders of 15 7/8% Secured Subordinated Debentures (the "Debentures") issued by Beker Industries Corp. Marine Midland Bank, N.A., the Indenture Trustee, has joined in the motion. The United States Trustee supports the motion. Beker Industries Corp. and Beker Phosphate Corporation (the "Debtors") and the Bank of Boston, N.A., National Bank of Canada, Commercial Credit Business Loans, Inc. and Commercial Credit International Banking Corporation (the "Banks"), holders of secured debt on nearly all the assets of Beker Industries Inc., oppose the motion. Concurrently, Jessup & Lamont Capital Corporation seek an order appointing an equity holders committee for both holders of preferred and common stock. The motion is opposed by the Bank of Boston and is supported by the Securities Exchange Commission, the United States Trustee and the Debtors.
FACTS
The Debtors filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 101 et seq. (1984) (the "Code"), on October 21, 1985. They have continued in possession. Beker Industries principally produces phosphate agricultural fertilizer. Beker Phosphate, a wholly owned subsidiary of Beker Industries, mines phosphate and sells it to Beker Industries. The statements of affairs list assets having an ascribed value of $321,000,000 for Beker Industries and $90,000,000 for Beker Phosphate. They assert liabilities of $228,000,000 for Beker Industries and $32,000,000 for Beker Phosphate.
Since the inception of these cases, they have been fraught with repeated activity which has reached only a momentary lull. Upon filing its petition, Beker Industries sought to use cash collateral held by three of the Banks. At a preliminary hearing held pursuant to § 363(c) of the Code, the motion was granted to permit use of $7,600,000. Shortly thereafter, Beker Industries commenced an adversary proceeding to avoid writs of sequestration obtained by Cargill Inc. ("Cargill") which tied up its entire inventory. At a hearing held on its motion for a preliminary injunction, a replacement lien was granted to Cargill by Beker Phosphate so that its parent and sole customer Beker Industries could operate and purchase ore from Beker Phosphate. At the continued hearing on Beker Industries' motion for use of cash collateral, it was ultimately permitted to enter into a modified financing agreement pursuant to § 364 of the Code with three of the Banks. By its terms, that agreement is only temporary and expires on December 31, 1985.
The community of interests involved in these cases is varied and widespread. Common and preferred stock issued by Beker Industries is traded on the New York Stock Exchange. Outstanding are roughly 12,000,000 shares of common held by 2,148 stockholders, at least as of March of this year, and 1,150,000 shares of preferred held by 339 entities. Debts listed by the Debtors in their lists of twenty largest creditors include significant sums owed to numerous public utilities and other entities. Included in the Beker Industries debt structure is $65,000,000 in principal amount of the Debentures. Those Debentures were issued in 1983. Repayment is secured by security interests in a chemical plant owned by Beker Industries and its interest in a mining partnership. On the date its petition was filed, Beker Industries claimed to own in excess of a 50% interest in the partnership. Apparently, an additional *948 partnership contribution was to be made shortly after the petition was filed in order to prevent readjustment and dilution of that interest. The contribution was not made. Beker Industries takes the position that its risk of a change ownership percentage was suspended by the triggering of the automatic stay provided by § 362(a) of the Code upon the filing of its Chapter 11 petition.
A hearing was held on November 8, 1985 with respect to the motion to appoint a special committee for the Debenture holders and on November 26 with respect to the motion for an equity committee. At the November 8 hearing, the Debtors opposed the motion to appoint a special committee for Debenture holders on three principal grounds: (i) that the motion and the making of it "may" be a violation of proxy rules promulgated under Section 14 of the Securities Exchange Act of 1934 and discovery should be allowed to determine such; (ii) that the movants hold approximately 42% in amount of the outstanding Debentures and thus it was averred that a committee was not needed to adequately represent this class of debt; and (iii) to appoint a committee would overly burden these beleaguered estates. At the hearing, this Court, relying on Blue Chip Stamps v. Manor Drug Stores, Inc., 421 U.S. 723, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1959) and Decker v. Massey Ferguson, Ltd., 681 F.2d 111 (2d Cir.1982), denied the request for discovery as to possible proxy rules violations. It was observed that the mere pleading of a possible violation in order to obtain discovery was not sufficient, particularly where no facts were set forth. The hearing was then adjourned to permit exploration of the membership and composition of the class of Debenture holders and whether they were adequately represented.
At the subsequent hearing it was shown that the records of the Indenture Trustee reflect 54 holders of record of the Debentures. Forty-two of those holders hold Debentures in principal amounts ranging from $1,000 to $20,000; five hold $50,000 of principal amount; two hold principal amounts of $180,000 and $500,000 and four hold principal amounts in excess of $1,000,000. The bulk, $54,813,000, is held on deposit by Cede & Co., a depository institution for brokerage firms, for some eighty one institutions either for their own accounts or for customers. Of those institutions from whom information has been gained, four hold $22,020,000 in principal amount of Debentures for 430 separate accounts. In addition, Magten Asset Management Corporation, one of the movants, holds Debentures of approximately $7,500,000, in principal amount, for 21 customers as a registered investment advisor and manager to various pension funds and individuals. Furthermore, Bear, Stearns & Co. ("Bear Stearns") reports that 42 of its accounts hold Debentures. The records of Depository Trust reflect that Bear Stearns has $4,876,000 in Debentures on deposit.
With respect to the common stock, management and insiders hold roughly 27%. According to a proxy statement dated March 30, 1985, another 10% was held by two entities; at the November 26 hearing it was stated that one entity had sold its shares, probably in the public market.
DISCUSSION
Section 151102(b) of the Code provides that, in addition to an official unsecured creditors committee, "the court may order the appointment of additional committees of creditors or of equity security holders if necessary to assure adequate representation of creditors or of equity security holders."
The statute affords no test of adequate representation, leaving the bankruptcy courts with discretion to examine the facts of each case to determine if additional committees are warranted. Certain benchmarks have thus been developed. Collier notes:
... in a large case, in which there are significant groups of creditors or equity security holders with conflicting claims which are likely to be affected by the plan of reorganization, the court should authorize the appointment of additional *949 committees. Such committees should be composed of creditors or equity security holders representative of classes as a whole as opposed to dissident factions of particular classes.
See 5 L. King, Collier on Bankruptcy ¶ 1102.2 at 1102-18 (15th Ed.1984); accord In re Fidelity America Mortgage Co., 7 B.C.D. 1186 (Bankr.E.D.Pa.1981). The exercise of discretion, however, also gives rise to a concern for cost, since the appointment of additional committees is "closely followed by applications to retain attorneys and accountants." In re Saxon Industries Inc., 39 B.R. 945, 947 (Bankr.S.D.N.Y. 1984), see also Matter of Baldwin-United Corp., 45 B.R. 375, 376 (Bankr.S.D.Ohio 1983). The statutory focus is on adequacy of representation. In a sense this is implicit in the statement from Collier's to the effect that a wide-spread holding shows the need for adequacy of representation. It thus appears that once the statutory tests are met, the burden shifts to the opponent of the motion to show that the cost of the additional committee sought significantly outweighs the concern for adequate representation and cannot be alleviated in other ways.
Here it is clear that the holders of Debentures and stock need to be represented by separate official committees. Most importantly, the public debt here is widely held. While a significant portion, particularly of the public debt, may be held for their own account by institutions having the financial interest and means to represent themselves, the presence of at least 400 holders of small amounts indicates the need for their representation through an official committee having the fiduciary responsibility of acting on their behalf. The same is true of the shareholders. The position that some members of the class may have resources sufficient to protect their interests is of little significance, in our judgment, at least where the security is widely held. They do not have the fiduciary duty to represent their fellow security holders.
With respect, moreover, to the Debenture holders, it would appear that the debt they hold is partially or wholly secured. If wholly secured, the Debenture holders are thus ineligible for membership on the unsecured creditors committee. Indeed, the unsecured creditors have refused to admit them to membership on the unsecured creditors committee. If only partially secured due, inter alia, to Becker Industries' failure to make an additional contribution to the partnership, the debt is subordinated. The holders of unsecured public debt that needs to be reorganized were traditionally recognized as requiring protection of a trustee under the former Bankruptcy Act and therefore supporting transfer from former Chapter XI to former Chapter X. See Securities & Exchange Commission v. American Trailer Rentals Co., 379 U.S. 594, 613-14, 85 S.Ct. 573, 523-24, 13 L.Ed.2d 510 (1965); In re Arlan's Department Stores, Inc., 373 F.Supp. 520 (S.D.N.Y.1974). Here there is a question as to whether the Debenture holders are fully secured.
In addition, the complex nature of this large case requires representation of Debenture holders and shareholders. As Collier illustrates, the size of a bankruptcy case strongly indicates the need for additional committees representing different interests. 5 L. King, supra. A large case brings with it not only a varied debt structure but a complex business requiring significant post-petition financing and a heavily negotiated plan. Here post-petition financing is due to expire in five weeks and the ability to reorganize will likely depend upon the acceptability to the creditor body of available replacement financing.
In short, this is not a case where the Debenture holders and shareholders will be asked merely to vote on a plan. This is a case requiring active participation by Debenture holders and shareholders to protect their interests.
To all this, the Debtors respond that representation of the Debenture holders is not required because of the presence of an Indenture Trustee, and because it may be *950 that some of the Debentures held for individuals are lodged in discretionary or managed accounts. They add that, in their view, the making of the motion violates the Indenture.
These arguments are of no merit. If the mere presence of an indenture trustee were thought to bar appointment of a committee for debenture holders pursuant to § 151102(b) and § 1102(a)(2) of the Code, those sections would have excluded debenture holders from their embrasive coverage for nearly all debenture issues have provided for an indenture trustee. Moreover, contrary to the position of the Debtors and that of the Bank of Boston, the rights provided to the Indenture Trustee here upon default or Beker Industries entering bankruptcy, as set forth in ¶¶ 6.02-6.05 of the Indenture the pursuit of legal remedies, taking possession of the collateral and its proceeds, and appointment of and seeking the appointment of a receiver are all effectively barred by the automatic stay provided by § 362(a) of the Code. Furthermore, the rights and duties of committees are far broader than that afforded the Indenture Trustee in this Indenture. Also ¶ 7.01(b) of the Indenture would on its face limit the fiduciary responsibility of the Indenture Trustee. It states:
(1) The Trustee need perform only those duties that are specifically set forth in this indenture and no others;
(2) In the absence of bad faith on its part the Trustee may conclusively rely as to the truth of the statements and the correctness of the opinion expressed therein upon certificate or opinions furnished to the Trustee and conforming to the requirements of this indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this indenture.
The rights and duties of a committee, and its investigation and consequent reliance as set forth in § 1102 of the Code are far broader.
Secondly, the assertion that the making of the motion violates § 6.09 of the Indenture is not worthy of discussion. The section only limits the ability of a Debenture holder "to purse a remedy with respect to this Indenture or the Securities ..." Seeking the appointment of a committee falls into neither category.
Third, that some of the Debentures might be held in discretionary accounts is also irrelevant. Discretion gives a securities broker the power to trade in securities and to act as attorney in fact with respect to such trades. Charles H. Meyer, The Law of Stockbrokers and Stock Exchanges, § 62 (1931). Those powers are irrelevant to the pursuit of rights under the Bankruptcy Code. At the previous hearing, the Debtors conceded as much as to the motion to appoint an equity committee. Although they observed that many of the holders of equity in this case might also hold securities in discretionary accounts, they consented to the motion. Moreover, the opponents' reliance on In Re Emons Industries Inc., 50 B.R. 692 (Bankr.S.D.N. Y.1985), Matter of Baldwin-United Corp., 43 B.R. at 375 and Saxon, 39 B.R. at 945, is without merit. In each of those cases, committees were appointed. The court in Baldwin-United denied appointment only for each class of equity, noting that the debtor had anywhere from twenty to fifty classes of equity. In Emons an equity committee was appointed, this court stating that generally there should not be an equity committee where a debtor is hopelessly insolvent and not every case requires one. In Saxon a debenture holders committee was appointed. The court denied a motion to reconstitute on the ground, inter alia, that to grant the motion would exclude some debenture holders who needed representation.
Here the Debtors are solvent or, at least, claim to be, and the widespread holders of stock and Debentures need representation. Indeed, the Debtors need to have them represented. The purpose of Chapter 11 is to negotiate and confirm a plan. Debenture holders and stockholders have significant interests in these cases and negotiation *951 with representatives of all of them will be required.
Nevertheless, the very complexity supporting appointment of a committee also gives concern for the fees and expenses it will incur. The powers of a committee, set forth in § 1102(c) of the Code, are broad. Applications to employ counsel are inevitable. The opponents to these motions, however, have not shown that the cost is so burdensome to deny official representation.
But the cost of the official unsecured creditors, equity and debenture committees does cry out for some prospective management. These committees can and should determine their joint interests and address them jointly; steps to minimize duplication can and should be taken; fees and expenses are to be closely monitored by committee members so that this Court is not presented with matters that have run out of hand and is faced with a plethora of objections. Applications to employ professionals in addition to attorneys are to be deferred until after January 1, 1986, when the Debtor's financing will be clarified. Finally, because of the Debtor's current cash flow problems, no interim fee applications are to be made until March 31, 1986. At that time it will be considered whether further deferral is proper or warranted.
That deferral, however, does not preclude motions being made to conserve expenses upon monitoring fees. Fees should not be built up beyond reasonable expectations. All parties in interests should be concerned about expenses in these cases. They are to work out a process whereby statements of the fees being incurred on a monthly or perhaps an even shorter period of time can be circulated among the committees, the Banks, the Debtors, and the United States Trustee, so that a handle can be kept on these fees and they do not escalate unreasonably.
In summary, it is the shaky nature of these cases that leads primarily to the judgment that these wide-spread holders of stock and Debentures need representation here. This is not a case of a debtor who has filed for bankruptcy because of a temporary cash flow problem that former Chapter XI was designed originally to give him time to cure and to come to an arrangement with his creditors. As was perfectly evident from the cash collateral hearings, these are debtors who have significantly more problems.
The United States Trustee is, therefore, ordered to appoint representative committees representing equity holders and Debenture holders. He is further directed, in forming a representative committee, to solicit the holders of smaller holdings to serve on those committees. They are the people who are most in need of representation in these cases.
IT IS SO ORDERED.
NOTES
[*] Because of the need for immediate appointment of committees representing debenture and equity holders, the Court rendered an oral decision at the close of the hearing on November 26, 1985. Several attorneys requested the decision be published. What follows is that decision as edited slightly for publication with no change in substance. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543870/ | 53 F.2d 369 (1931)
UPDIKE et al.
v.
OAKLAND MOTOR CAR CO.
No. 250.
Circuit Court of Appeals, Second Circuit.
August 4, 1931.
Jonas & Neuburger, of New York City (David Haar and Murray L. Jacobs, both of New York City, of counsel), for appellants.
Henry M. Hogan, of New York City (Albert M. Levert and John Thomas Smith, both of New York City, of counsel), for appellee.
Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.
*370 AUGUSTUS N. HAND, Circuit Judge.
The decree from which this appeal has been taken was rendered in a suit by the trustees in bankruptcy of H. L. Stratton, Inc., to recover preferences alleged to have been received by Oakland Motor Car Company from H. L. Stratton, Inc., at a time when the Oakland Company had reasonable cause to believe that the Stratton Company was insolvent and that an unlawful preference would be effected. The transfers were made within four months of the voluntary adjudication in bankruptcy of Stratton Company, which occurred December 30, 1926. The District Court held that Stratton Company was solvent at the times when the transfers were made and that in any event Oakland Company had no reason to suppose that this was not the case. It accordingly dismissed the bill.
Stratton Company was a dealer in automobiles under a contract with Oakland Company as seller. The latter engaged to sell motor cars and accessories to Stratton as its exclusive dealer in a certain territory in which Stratton operated many agencies. The method of handling the sale of cars under the above contract was somewhat complicated, but requires no particular consideration here. Stratton ordinarily purchased the cars by making a 10 per cent. deposit on account of the purchase price and giving a trust receipt to the General Motors Acceptance Corporation to secure notes for the balance of the purchase money. In 1926, Stratton did a large and greatly increased business, making sales of cars and accessories in the first ten months of the year to the extent of nearly $4,000,000. This business was especially active in July and August, but in September there was a serious recession which caused Stratton to apprehend that it would be without adequate capital to go through the slack fall and winter season and be ready for the spring business. Accordingly, in November, 1926, the president, Mr. Stratton, requested Oakland to take over such portion of the stock of cars as seemed to be unduly large in view of the poor business outlook. Any unnecessary stock, of course, increased the amount of interest Stratton had to pay on its notes given for the purchase of cars and secured by trust receipts and also tied up capital invested in cars which it had entirely paid for. Stratton requested Oakland to take over these surplus cars, whether owned outright or held on trust receipts, and to pay it for the cars which it completely owned and also for what is described as the "equity" in the others. Oakland did this. It took over the cars owned by Stratton at the dates, in the numbers and stipulated values below:
1926
Nov. 18, 64 cars at .... $44,798.37
Nov. 30, 69 cars at .... 52,304.79
__________ $97,103.16
Oakland took over the following
cars upon which 10 per cent.
of the purchase price had been
deposited by paying off General
Motors Acceptance Corporation
which held notes secured by trust
receipts for the remainder, and
purchased Stratton's equity by
crediting the latter with the
amount thereof on its books:
1926
Nov. 18, 139 cars at ... $12,553.43
Nov. 30, 23 cars at .... 1,783.05
__________ 14,336.48
___________
Total ......................... $111,439.64
The foregoing amounts due from Oakland to Stratton for the purchase of cars and equities in cars were paid by a check from Oakland to Stratton for $50,000 dated December 1, 1926. This left a balance in connection with the foregoing transactions amounting to $61,439.64. Oakland paid that balance by crediting Stratton therewith on its books and setting off these credits against a greater indebtedness to Oakland.
Thirty-two other cars were held on trust receipts by General Motors Acceptance Corporation. These cars were taken back by it on December 22, 1926, and apparently purchased from it thereafter by Oakland. On December 22, 1926, the latter credited Stratton on its books with the equity in the cars amounting to $2,242.26 and offset this sum against the indebtedness of Stratton.
The questions are mainly of fact. We are asked to find that Oakland had reasonable cause to believe that a preference would be effected when the foregoing transfers were made. Of course, no such problem arises unless Stratton was insolvent at the time, and the trial judge has held that Stratton was solvent both in November and December. We think that this was true at the earlier date.
If we take the financial statement of November 30, 1926, and omit the good will as an asset and the capital stock as a liability, there is a balance of assets over liabilities amounting to $276,937.13. We will reduce *371 "Charge Accounts Customers," as the trial judge did, by $28,433.92. We will exclude the items, "Due from Finance Companies," "Pay Roll Advance," "Accrued Shop Labor," "Rebate and Disability Insurance," "Additional Discount," "Rent Prepaid," "Interest and G. M. A. C. Finance Charges," "Advertising" and "Building Improvements." Some of these items, such as the prepaid ones, would seem to be allowable, and some of the others were not altogether valueless. We may also reduce the valuations of "Notes Receivable" from $6,479.51 to $221, as the trial judge did. These various deductions would lower the statement of assets by about $116,630.89.
It is claimed that the valuations for Oakland, Pontiac & Co. cars, carried in the statement at $173,773.12, were too high. They appear in the statement at cost, which was 27 per cent. or 28 per cent. below the selling price of the dealer. Three hundred and twenty-seven of such cars were taken over and repurchased by Oakland at these very figures. Yet appellant wishes to reduce these items because the business of Stratton needed capital and there was a recession in trade and the general situation indicated an inability to realize such prices. But this argument seems dependent on Stratton's large overhead which may not have been necessary. It does not follow that the cars were worth only what would be their net yield to Stratton after charging them with their share of the huge expenses of an expanding business. It seems difficult to suppose that these new cars would not yield the cost price to the dealer. In the complaint the appellant alleged that the market value of the cars repurchased by Oakland was $300,000, whereas the cost price was $261,590.90. The record of sales of such cars for ten months in 1926 showed a profit of $462,446.27. Undoubtedly the overhead more than exhausted this profit, but it cannot be said that this was not due to the expenses of a too rapidly expanding business system. We cannot find that the trial judge reached a wrong conclusion in fixing cost as a fair value for these cars.
The used cars were carried at $100,140.92, and the court valued them at $85,000. This was perhaps too high. The appellant was attempting at the trial to reduce the value to $70,000, and we think that figure is more reasonable than the one adopted. While used cars seem to have sold very close to the inventory price, these sales did not take into account all the expenses always connected with storing and marketing such commodities. The foregoing reduction will further lessen the assets in the statement of November 30, by $30,140.92.
The liabilities which appellant says are omitted and should be added to the statement are:
(1) Oakland parts on route, $25,015.79. The only testimony is to the effect that this item was already included in accounts payable, and so the District Judge found.
(2) Contingent Claim of General Motors Acceptance Corporation for $55,000. Where cars held on trust receipts were sold to the public, the customers' notes were guaranteed by Stratton to the Acceptance Corporation. The latter still had a lien upon the cars to secure the notes and there were reserves set up in the financial statement amounting to $21,822.35 for these contingent liabilities. There is no proof that these cars were not worth enough in November and December, 1926, to satisfy the contingent liabilities. It is to be noticed that we have already excluded the item of $18,244.53 carried in the assets and allowed by the trial judge, which appeared to represent notes of customers who had purchased cars which Stratton had discounted. There was a contingent liability on these notes only if the customers broke their contracts and the cars would not satisfy the indebtedness. It is impossible to say that in November and December, 1926, the cars were not worth the difference of about $33,000 between the claim of $55,000 and the reserves set up, and there is nothing tangible to justify the conclusion that the finding of the trial judge was incorrect. Indeed, there was testimony that repossessed taxicabs were sold at a loss of only 1.6 per cent.
(3) Amounts due for advertising, $50,751.96, and due Oakland for parts, $7,681.90. These were included by the judge under the item "Oakland Car Account $58,433.86." He excluded the item $29,481.18 carried as a reserve to meet expenses of advertising and promotion. If the item of $29,481.18 be retained among the liabilities, the difference between $58,433.86 and $29,481.18 that is to say, $28,952.68 should be added to the liabilities.
(4) Accrued federal taxes amounting to about $5,000.
There are also to be included the following amounts added by the District Judge to the liabilities:
*372
Purchase creditors ........ $35,000.00
Unadjusted remittance ..... 5,000.00
Warehouse storage ......... 4,745.72
__________ $44,745.72
The effect of the above additional items would be to increase the liabilities appearing in the financial statement by $78,698.40.
As a result of the foregoing estimates:
Assets are reduced
by ................. $116,630.89
Liabilities increased
by ................. 78,698.40
___________ $195,329.29
This sum of $195,329.29, if deducted from the balance of $276,937.13, shown by the financial statement after excluding good will and capital stock, still leaves a net worth, on November 30, 1926, of $81,607.84. Even assuming that there should be some further deductions, they could hardly be sufficient to make us differ with the conclusion of the trial court that Stratton was not proved insolvent on November 30, 1926.
Stratton, though pressed for money, was a going concern, doing a considerable business, when it arranged with Oakland to take over the cars. Its president not only believed his business would survive and insisted that it had a substantial value, but Oakland probably was of the same opinion. Stratton had spent a great deal of money and had done a large business the year before. Though it was done at a loss, there was fair reason to believe that its aggressive policy and large advertising would bear fruit another season.
After the purchase of the surplus cars in November, and about December 16-18, Oakland made an examination of Stratton's affairs. Oakland's president, Glancy, had promised Stratton it would purchase its business at $50,000, more than the established value. The examination was with a view to such a purchase. By the time that examination was made Stratton had failed to meet a note for $100,000, due December 17. This examination disclosed Stratton's perilous and hopeless situation. It was without capital, and its business was running behind at $90,000 per month. Glancy testified that he learned just before Christmas that the condition of Stratton was "horrible," and on or about December 20 Stratton was informed that the proposed purchase would not go through. The adjudication in bankruptcy followed ten days later.
In the circumstances, we cannot find that the purchase of the cars on November 18 and 30 involved preferential transfers. It is too rigorous to hold that a creditor apprehends bankruptcy and is seeking a preference because he secures payment from a debtor whose solvency is in some doubt and who may become insolvent in the near future.
The report of Stratton's secretary, McCoy, on November 1, shows how things stood and the need of $250,000 to carry Stratton through until spring, "when we all believe," says the report, "the Oakland and Pontiac will obtain a dominant position in our territory, as the result of our efforts this year." Even if Oakland had known the business conditions of Stratton in detail in November, 1926, we cannot say that it would not have been justified in taking payment of its claim as it did. While it knew Stratton was pressed for money, its books, the honesty of which is not impugned, showed a net worth of about $275,000 (Exhibit F). The facts resulting from the elaborate analysis of the value of the business made in the course of this litigation could not then have been known to Oakland. The valuations of new cars and accessories in the books was fair, and the valuation of used cars was not very far from the realizable value. We cannot say that Stratton was insolvent when the November transfers were made, or that, in November or early December, Oakland either knew or had reason to believe that the transfers would result in a preference.
The transfer of December 22 stands on a different footing. Then Stratton was desperate, had defaulted on its $100,000 note, was running behind at the rate of $90,000 per month for current charges, and Oakland would not act on the suggestion of its president to purchase Stratton's assets. The examinations of Stratton's affairs on December 16, 17, and 18 had revealed everything, and the situation had finally become one of known as well as real insolvency. It was too late to reduce expenses and attempt to wind up. Nothing but bankruptcy was likely to eventuate. In such circumstances, the transfer of Stratton's equity in the 32 cars, on December 22, in payment of Stratton's debt to Oakland, was an unlawful preference.
The appellants argue that Oakland should have paid for the equities in the cars in cash, instead of taking set-offs for all but $50,000. Stratton said the agreement was to pay in cash, and the trial judge evidently believed him. But Stratton never claimed that Oakland *373 in terms promised not to exercise the right of set-off or that the payment was to be a special deposit in Stratton's favor or was to be applied by Oakland in some specific way. Libby v. Hopkins, 104 U. S. 303, 26 L. Ed. 769; Lehigh Valley C. S. Co. v. Maguire (C. C. A.) 251 F. 581; Farmers' & Merchants' State Bank v. Park (C. C. A.) 209 F. 613. Stratton did say that Oakland promised to carry the advertising account indefinitely. But such a promise would not in itself prevent a set-off even now. Moreover, if there was a promise to pay cash, that was not an agreement to apply the moneys for a particular purpose, or to hold them as a special deposit. It involved no fiduciary relation, but only a promise by Oakland to pay Stratton. An agreement must be clear and specific to deprive a party of the ordinary right of set-off. Stratton was trying to get $250,000 from Oakland to tide his company through the winter, and was hoping against hope for ready cash, but he got no agreement not to set off and the right of set-off existed because the claims were mutual. But, in any event, complainants have pleaded no cause of action to recover a special credit, or to enforce a promise to pay in cash, and there is no assignment of error which attacks the decree because of any denial of such a claim. The only assignments of error which are of any importance are aimed at the failure of the court to find Stratton insolvent and to find that Oakland had reasonable cause to believe that such was its condition.
The decree is so modified as to allow the recovery by complainants of $2,242.26, with interest from December 22, 1926, and is otherwise affirmed, with costs to appellants. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1543871/ | 567 A.2d 368 (1989)
Leonard J. JENARD, Jr.
v.
James HALPIN et al.
No. 88-535-Appeal.
Supreme Court of Rhode Island.
December 21, 1989.
*369 Leonard Decof, John S. Foley, Decof & Grimm, Providence, for plaintiff.
Joseph F. Penza, Jr., Olenn & Penza, Warwick, Fred Joslyn, Cranston, for defendants.
Before FAY, C.J., and KELLEHER, WEISBERGER, MURRAY and SHEA, JJ.
OPINION
PER CURIAM.
On December 7, 1989, counsel for the litigants in this Superior Court wrongful-death action appeared before this court to show cause why the issues presented in the plaintiff's appeal should not be summarily decided.
The defendants in this action are the city of Pawtucket and two members of the Pawtucket police department who have been sued for their alleged negligence in pursuing plaintiff's thirteen-year-old son. In late March 1982, plaintiff's son was operating a "dirt bike" along with two others when defendants attempted to stop them because both the deceased and his friends were operating unregistered motor vehicles. When the police initiated the stopping maneuver, the youths accelerated the bikes and rode off with defendants in pursuit.
Sometime during the chase the deceased and his companions took different routes. The police then pursued the deceased at speeds of up to thirty to thirty-five miles per hour for about a mile. During this period the deceased ignored five stop signs and drove up a one-way street the wrong way.
The police, however, gave up the chase when it became apparent to them that the driver was heading into Slater Park, an area into which the police had no access. As the deceased headed to the park, he continued through an intersection without diminishing speed and collided with another vehicle. The injuries he received as a result of the collision were fatal.
In his charge to the jury the trial justice reminded the jurors that in their deliberations they were confronted with the issues of "whether the defendants were negligent and whether the defendants' negligence was a proximate cause of that accident." He also emphasized that if the jury found defendants negligent, the jury was still required to determine if plaintiff had sustained the burden of showing that the negligence was the proximate cause of the injuries and fatality.
A verdict sheet was submitted to the jury, and it indicates that the jury was of the belief that all defendants were negligent but that their negligence was not the proximate cause of the decedent's death. The jury also responded to two issues on the sheet relative to assessing comparative *370 liability. The jury attributed 60 percent of the negligence to the decedent and 40 percent to defendants.
The plaintiff has argued that the jury's voluntary assessment of comparative liability when it was not an issue is a case of confusion experienced by the jury. The trial justice, however, determined that despite these responses relative to comparative negligence on the verdict sheet, it was obvious that the jury had found that defendants' actions were not the proximate cause of the injuries and fatality. In making this observation, he commented that there were "many, many objective opportunities for the jury to find negligence without proximate cause."
It is well settled that in order to gain recovery in a negligence action, a plaintiff must establish a legally cognizable duty owed by a defendant to a plaintiff, a breach of that duty, proximate causation between the conduct and the resulting injury, and the actual loss or damage. Atlantic Home Insulation, Inc. v. James J. Reilly, Inc., 537 A.2d 126, 128 (R.I. 1988). Here the record clearly indicates that the trial justice's instructions in regard to the element of proximate cause were right on target.
The jury's proximate-cause determination finds support in the evidence, and it is clear that at one point the officers had stopped their vehicle and abandoned the chase by the time of the fatal collision. There had also been a break at one point in the chase when the deceased pulled off the road and stopped and the defendants also stopped their vehicle.
After an examination of the record, memoranda, and arguments of counsel, this court is of the opinion that the trial justice, in his consideration of the defendant's motion for a new trial, discharged his duties in an exemplary fashion. The plaintiff's appeal is denied and dismissed, and the judgment appealed from is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/8304421/ | Mr. Justice Humpheeys
delivered the opinion of the Court.
Petitioner Harvey B. Roberts executed a “Waiver of Trial and Request for Acceptance of Plea of Guilty” to the charge of robbery with a deadly weapon on September 23, 1965. The plea was recorded, a jury impanelled, a verdict rendered, and petitioner was sentenced to serve the statutory minimum sentence.
Roberts filed for a writ of habeas corpus on August 18, 1968, and an evidentiary hearing was held on October 27, 1968, resulting in dismissal of the petition. On appeal, the Court of Criminal Appeals reversed, sustaining the *117writ of habeas corpus. We granted certiorari to review that decision.
Roberts’ contention, upheld on appeal, is that the judgment in his case is void because the general sessions judge who issued his arrest warrant, after being elevated to the criminal court bench, accepted his plea of guilty. It is said this violated in parts pertinent, Article 6, sec. II of the Tennessee Constitution, here cited:
‘ ‘ Section 11. Incompetency of judges — Special judges. No Judge of the Supreme or Inferior Courts shall preside on the trial of any cause * * * in which he may have presided in any inferior Court, except by consent of all the parties. * * *” (Emphasis added.)
While the Court of Criminal Appeals acted in accord with Wilson v. State, 153 Tenn. 206, 281 S.W. 151 (1925), we have decided the Court’s ruling in that case should be reviewed; a review, the inevitability of which was indicated by our opinion in Hamilton v. State, 218 Tenn. 317, 403 S.W.2d 302, where, although Wilson was recognized and cited, its infirmity was also recognized by the refusal of the Court to bottom its decision squarely thereon in spite of its being in point.
In Wilson, the district attorney-general who signed the indictment against Wilson and prosecuted him in the first trial, which resulted in a mistrial, having been elevated to the circuit court bench, presided as judge at Wilson’s second trial. Reviewing the judgment of conviction this Court held on authority of Glasgow v. State, 68 Tenn. 485 and Neil v. State, 70 Tenn. 674, 675, that while under the Constitution and statute parties may waive the disqualification of an incompetent judge in a civil case, it is against the policy of the law to permit a *118disqualified judge to preside in a criminal case even though the defendant has consented thereto.
In Hamilton, in spite of this broad statement, we were not content to rest our decision thereon, but in final analysis rested it on the fact that there was no clear evidence of waiver or consent, and on the possibility that under the record the waiver had been by state appointed counsel and so was state action, not the action of the defendant himself.
Turning to a consideration of the authority cited in Wilson for its broad statement that a defendant in a criminal trial cannot consent to a trial presided over by a judge who may be disqualified under the Constitution and statute, we find that Glasgow v. State, supra, Neil v. State, supra, and Low v. State, 111 Tenn. 81, 78 S.W. 110, which are the basis for the opinion, did not in fact deal with the question, and so could not have made any pronouncement thereon. In each of these cases the question was whether the trial could be presided over by a special judge who had not been elected as provided by statute. And, holding that such an election was indispensable to vest the judge with a judicial status, a status which could not be conferred by consent, the convictions were reversed.
The rulings in these cases are readily understandable, and no fault can be found therewith. Those who attempted to act as judges were in point of fact and under the Constitution and statute simply unauthorized in any manner to assume that role. And there being nothing in the statute with respect to special judges or in the Constitution which would allow an unauthorized person to act as a judge, the result was inevitable. But that was not the case in Wilson, nor is it the case here. In Wilson *119there was a constitutionally commissioned judge. He was not an interloper. Nor, was he presiding over the court without semblance of authority so to do as in Glasgow, Neil and Low. So, we must look elsewhere for any justification for the holding that it is against the public policy of the law to allow a defendant to waive a constitutional disqualification in a criminal case. And, the only place we can look for an answer to this question is to the Constitution itself and to the statute enacted pursuant thereto. And in both the Constitution and the statute it is clearly and plainly declared to be the constitutional policy of the state, and the statutory law of the state, that a defendant has the right to waive the disqualifica-ion of the regular judge and to consent to his presiding at the trial. This is made most manifest by the unambiguous and clear provision in the Constitution that the incompetency of the judge can be waived by the consent of the parties. Article 6, sec. 11. And as is to be expected, the statute, T.C.A. sec. 17-201 follows the Constitution in this regard and in clear terms permits parties by their consent to waive the grounds of incompetency set forth in the statute.1
And, since the Constitution and the statute are the sources of a disqualification in both criminal and civil cases, the right to waive the disqualification exists in either case.
*120In Prescott v. Duncan, 126 Tenn. 106, 148 S.W. 299, we said that the object of construction of a written constitution is to give effect to the intent of the people in adoping it, hut this intent is to be found in the instrument itself; and it is to be presumed, unless an examination of the instrument demonstrates otherwise, that language has been employed with sufficient precision to convey the meaning intended; and the ascertained intent must be enforced.
Again, in State ex rel. Gouge v. Burrow, 119 Tenn. 376, 104 S.W. 526, we said that constitutional provisions are presumptively mandatory, and no provision shall be construed otherwise, unless the intention that it shall be so construed unmistakably and conclusively appears upon its face.
Since it is the settled rule, accepted by all, that no tribunal, general or special, legislative, judicial, or ministerial, may act in violation of the Constitution, and that it is supreme and paramount, and to its mandates all must yield obedience (Bouldin v. Lockhart, 69 Tenn. 195; Keith v. Funding Board, 127 Tenn. 441, 155 S.W. 142), this Court does not have the right to declare a policy or rule contrary thereto.
To put it simply, the Constitution makes the policy with respect to what the law shall be, and in this case it clearly authorizes parties to waive a disqualification.
The conclusion is by no means one-sided, against the defendant. It is not inconceivable that a defendant, knowing the trial judge to be a fair-minded, impartial officer, would rather that he preside over his trial than someone else about whose character and qualifications he knows nothing. And, if we were to adhere to the rule *121in Wilson we would have to deny the defendant this right even though he clearly is entitled to it under our Constitution.
In final analysis it is best that the plain and clear mandate of the Constitution, that parties shall have the right to waive the disqualification of their judge, and consent to his presiding at their trial, shall prevail.
In view of what we have said we necessarily overrule Wilson v. State, supra.
The voluntary plea of guilty constituting a waiver of disqualification and a consent for the regular judge to preside, we reverse the ruling of the Court of Criminal Appeals in this particular regard and affirm the judgment of the trial court.
BuRnett, Chief Justice, and Dyer, Chattin and Creson, Justices, concur.
“T.C.A. 17-201. Grounds of incompetency. — No judge or chancellor shall be competent, except by consent of all parties, to sit in the following cases:
(1) Where he is interested in the event of any cause.
(2) Or connected with either party, by affinity or consanguinity, within the sixth degree, computing by the civil law.
(3) Or has been of counsel in the cause.
(4) Or has presided on the trial in an inferior court.
(5) Or, in criminal cases for felony, where the person upon whom, or upon whose property, the felony has been committed, is connected, is connected with him by affinity or consanguinity within the sixth degree, computing by the civil law.” | 01-03-2023 | 10-17-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/1944842/ | 801 F.Supp. 394 (1992)
Michael TRAVERS, M.D., Plaintiff,
v.
Louis W. SULLIVAN, Secretary of Health and Human Services, Defendant.
No. CS-91-232-JLQ.
United States District Court, E.D. Washington.
June 24, 1992.
*395 *396 Kenneth Joel Haber, Rockville, Md., for plaintiff.
Frank A. Wilson, Asst. U.S. Atty., Spokane, Wash., Lucille G. Meis, Asst. Regional Counsel, Office of Gen. Counsel, Dept. of Health and Human Services, Denver, Colo., for defendant.
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
QUACKENBUSH, Chief Judge.
BEFORE THE COURT is Defendant's motion for summary judgment (Ct.Rec. 38), heard with telephonic argument on June 19, 1992. The Plaintiff was represented by Kenneth Joel Haber; the Defendant appeared through Assistant United States Attorney Frank A. Wilson, and general counsel for the Department of Health and Human Services, Denver, Colorado, Lucille Meis.
I. FACTUAL AND PROCEDURAL BACKGROUND
On December 16, 1988, the Plaintiff was charged in Utah state court with knowingly filing a false medical claim. Specifically, the Plaintiff was accused of using the wrong billing code number in claiming reimbursement for a Medicaid claim, resulting in misrepresentation of the services rendered by him.
The Plaintiff pleaded "no contest" to the charge. In his plea agreement, the Plaintiff agreed to pay restitution, investigation costs, and a civil penalty. (A.R. 186-88.) The plea agreement further provided that if the Plaintiff failed to make the agreed payment within 60 days, the court would accept his no-contest plea and proceed to schedule the matter for imposition of sentence. Id. The agreement also provided that if the Plaintiff complied with the terms of the agreement, the court would allow him to withdraw his no-contest plea and dismiss the charge against him with prejudice. Id. In its "Order In Re Plea Agreement," the Utah state court approved the Plaintiff's plea agreement "as a 1st offender disposition of the case." (A.R. 190.) In addition, the court took the Plaintiff's plea of "no contest" under advisement. Id.
On January 9, 1989, the Plaintiff notified the Utah court that the required payments had been made. On the same day, the court entered an order permitting the Plaintiff to withdraw his plea and dismissing, with prejudice, the criminal charges. On June 20, 1989, James F. Patterson, Director of Health Care Administration Sanctions, Office of Inspector General, United States Department of Health and Human Services, notified the Plaintiff that he was being excluded from participation in the Medicaid/Medicare programs and all state health-care systems for a mandatory period of 5 years under section 1128(a)(1) of the Social Security Act, 42 U.S.C. § 1320a-7(a)(1). The notification informed the Plaintiff that the exclusion was based on his conviction of a criminal offense related to the delivery of an item or service under the Medicaid program. (A.R. 204.)
The 5-year exclusion was affirmed upon administrative review by the Department of Health and Human Services Departmental Appeals Board (Appeals Board). The *397 Plaintiff then filed a complaint with this court for judicial review and for injunctive and declaratory relief. Specifically, the Plaintiff alleges that his agreement with the State of Utah did not amount to a conviction of a criminal offense related to the delivery of an item or service under the Medicaid program, thus his mandatory 5-year exclusion from the Medicaid program was not justified. Further, the Plaintiff alleges that his right to due process was violated in the administrative proceedings below.
On February 3, 1992, this court entered an order granting the Defendant's motion for a protective order. The protective order prevented the Plaintiff from engaging in discovery pending the resolution of the Defendant's initial summary judgment motion because the court found that the issue raised in the Defendant's motion involved a pure legal question. That question, which was before this court on April 10, 1992, was whether the Plaintiff was "convicted" of a "program-related" crime under 42 U.S.C. § 1320a-7(a)(1). In an order filed on April 23, 1992 (Ct.Rec. 35), the court granted the Defendant's summary judgment motion with respect to this issue. 791 F.Supp. 1471 (E.D.Wash.1992). However, the Defendant's initial summary judgment motion did not address the due process issues contained in the Plaintiff's complaint. Consequently, the court directed the Defendant to file an additional summary judgment motion addressing the remaining issues, which he did on May 15, 1992. Those remaining issues are now before the court.
II. JURISDICTION
Pursuant to 42 U.S.C. § 1320a-7(f), which incorporates 42 U.S.C. § 405, this court has jurisdiction to review administrative decisions to ensure that sufficient evidence exists to support the decision, and that the proper legal standard was used. Higbee v. Sullivan, 935 F.2d 1038, 1041 (9th Cir.1991). The court's review, however, is limited to the Secretary's final decision, the administrative record, and the pleadings. Id. The Defendant's factual determinations, if any, will be upheld if they are supported by substantial evidence. 42 U.S.C. § 405(g).
III. SUMMARY JUDGMENT STANDARD
The purpose of summary judgment is to avoid unnecessary trials when there is no dispute as to the material facts before the court. Zweig v. Hearst Corp., 521 F.2d 1129 (9th Cir.), cert. denied, 423 U.S. 1025, 96 S.Ct. 469, 46 L.Ed.2d 399 (1975). The moving party bears the burden of informing the court of the basis for its motion, together with evidence demonstrating the absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986).
The moving party is entitled to summary judgment when, viewing the evidence and the inferences arising therefrom in favor of the nonmoving party, there are no genuine issues of material fact in dispute, and they are entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Semegen v. Weidner, 780 F.2d 727 (9th Cir.1985). However, where reasonable minds could differ on the material facts at issue, summary judgment is not appropriate. See v. Durang, 711 F.2d 141 (9th Cir.1983).
When evaluating evidence offered to resist summary judgment, the Ninth Circuit distinguishes between direct and circumstantial evidence. See T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630-31 (9th Cir.1987). Where the nonmoving party has come forward with direct evidence contrary to that offered by the movant, a credibility issue is raised. Credibility determinations are for the trier of fact and, therefore, are not appropriately resolved by summary judgment. McLaughlin v. Liu, 849 F.2d 1205, 1207 (9th Cir.1988). Where direct evidence produced by the moving party conflicts with direct evidence produced by the nonmoving party, the court must assume the truth of the evidence set forth by the nonmoving party with respect to that fact. T.W. Elec., 809 F.2d at 631-32. However, when the only evidence offered in opposition to the motion for summary judgment *398 is circumstantial evidence, then the court may inquire into the plausibility of inferences drawn from that evidence. Id.
In evaluating the appropriateness of summary judgment, three steps are necessary: (1) determination of whether a fact is material; (2) determination of whether there is a genuine issue for the trier of fact, as determined by the documents submitted to the court; and (3) consideration of that evidence in light of the appropriate standard of proof. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986). As to materiality, "only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes which are irrelevant or unnecessary will not be counted." Id. at 248, 106 S.Ct. at 2510. When there is a complete failure of proof concerning an essential element of the nonmoving party's case, all other facts are rendered immaterial, and the moving party is entitled to judgment as a matter of law. Celotex, 477 U.S. at 323, 106 S.Ct. at 2552.
Even if a fact is determined to be material, summary judgment is still inappropriate if the dispute about that fact is genuine, that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson, 477 U.S. at 248, 106 S.Ct. at 2510. However, there is no genuine issue of fact if, on the record taken as a whole, a rational trier of fact could not find in favor of the party opposing the motion. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).
A party opposing a motion for summary judgment "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586, 106 S.Ct. at 1355. In order to survive a supported motion for summary judgment, the nonmoving party must set forth "specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). In other words, once the moving party has met its burden, the party opposing the motion may not rest upon the allegations or denials contained in his pleadings. Anderson, 477 U.S. at 248, 106 S.Ct. at 2510.
"[A]t the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249, 106 S.Ct. at 2510. "When determining if a genuine factual issue ... exists, ... a trial judge must bear in mind the actual quantum and quality of proof necessary to support liability...." Id. at 254, 106 S.Ct. at 2513. This necessitates application of the substantive evidentiary standard of proof that would apply at the trial on the merits. Id. at 252, 106 S.Ct. at 2512. "Thus, in ruling on a motion for summary judgment, the judge must view the evidence presented through the prism of the substantive evidentiary burden." Id. at 254, 106 S.Ct. at 2513. The question is, therefore, "whether a jury could reasonably find either that the plaintiff proved his case by the quality and quantity of evidence required by the governing law or that he did not." Id. (Emphasis in original.) The standard which governs the trial judge's determination as to whether a genuine issue exists is provided by the applicable evidentiary standards. Id. at 255, 106 S.Ct. at 2513. This being a civil case, the applicable evidentiary standard is a preponderance of the evidence.
IV. DISCUSSION
The following issues are raised by the Defendant in his second motion for summary judgment: (1) whether the Defendant improperly delegated to the Inspector General the responsibility of imposing sanctions and exclusions from the Medicare and Medicaid programs; (2) whether the Defendant had to adopt regulations implementing the 1987 revisions to 42 U.S.C. § 1320a-7 before an exclusion could be made pursuant to that section; (3) whether the Defendant relied upon "secret, unpublished rules" to exclude the Plaintiff from participation in the Medicare and Medicaid programs; (4) whether the Defendant has deprived *399 the Plaintiff of his constitutional right to due process, and deprived him of a full and fair hearing under the Administrative Procedures Act, the Medicare statute, and the United States Constitution; and (5) whether the court, in its order granting the Defendant's initial summary judgment motion, afforded improper deference to the administrative decision-makers. Each of these issues will be addressed in turn.
A. Improper Delegation of Authority
The Secretary of Health and Human Services (Secretary) is primarily responsible for the administration of the Government's various health-care programs established under the Social Security Act. Many of the responsibilities for administering the Medicare and Medicaid programs were originally delegated to the Administrator of the Health Care Financing Administration, including the authority to detect, prosecute, and punish fraudulent activities under the programs. See Greene v. Sullivan, 731 F.Supp. 835, 837 (E.D.Tenn.1990). On April 18, 1983, this responsibility was transferred to the Office of the Inspector General. Id. The Office of the Inspector General was created by Congress to detect and prevent fraud and abuses in the Medicare and Medicaid programs. See 5 U.S.C.App. § 2(2). Congress authorized the Secretary to transfer to the Inspector General "the offices, units, or other components, and the functions, powers, or duties thereof, that [the Secretary] determines are properly related to the functions of the Office of the Inspector General and would, if so transferred, further the purposes of this section." 5 U.S.C.App. § 8E(b). However, Congress limited the ability of the Secretary to delegate when it stated that "[t]here shall not be transferred to [the Inspector General] any program operating responsibilities." Id.
In the case at bar, the Plaintiff points out that the Defendant delegated to the Inspector General the authority to exclude individuals from participation in the Medicare and Medicaid programs. According to the Plaintiff, this delegation resulted in a transfer of a program operating responsibility, which is prohibited by 5 U.S.C.App. § 8E(b).
When Congress revised the exclusion statute in 1987, it noted that the Secretary's delegation to the Inspector General of exclusion sanction authority was proper. Specifically, Congress stated:
Under current practice, the Secretary has delegated all existing suspension, exclusion, and civil monetary penalty authorities to the Department's Inspector General. The Committee believes that this delegation of authority by the Secretary is entirely consistent with the statutory mandate of the HHS Inspector General ... and has resulted in the efficient administration of these authorities. The Committee expects the Secretary both to continue this existing practice and to delegate all new statutory exclusion authorities created by this bill to the Department's Inspector General.
S.Rpt. No. 100-109, 100th Cong., 1st Sess. 5, reprinted in 1987 U.S.Code Cong. & Admin.News 682, 695. Moreover, the court in Greene v. Sullivan, 731 F.Supp. 835 (E.D.Tenn.1990) held:
While Congress did not define "program operating responsibilities," the legislative history of the Inspector General statute suggests that Congress was referring to day-to-day, "hands-on" responsibilities for the overall administration of the Department's health and welfare programs. The history makes it clear that Congress fully intended the Inspector General to detect and prevent fraud and abuse in program operations.
Id. at 837. The court in Greene saw nothing inappropriate in the Secretary's delegation of the exclusion sanction authority to the Inspector General, and neither does this court.
The Plaintiff argues that the 1987 Congressional comments concerning delegation should be disregarded because the provision at issue was enacted in 1976. The Plaintiff alleges that the 1987 Congress had no knowledge of what a prior Congress intended when it enacted a piece of legislation.
*400 The Plaintiff is correct that the views of a subsequent Congress cannot provide a controlling basis from which to infer the purposes of an earlier Congress. See Haynes v. United States, 390 U.S. 85, 87 n. 4, 88 S.Ct. 722, 725 n. 4, 19 L.Ed.2d 923 (1968). While the Supreme Court has acknowledged that the views of subsequent Congresses cannot override the unmistakable intent of the enacting one, it has also held that "such views are entitled to significant weight, [citation omitted] and particularly so when the precise intent of the enacting Congress is obscure." Seatrain Shipbuilding Corp. v. Shell Oil Co., 444 U.S. 572, 596, 100 S.Ct. 800, 813, 63 L.Ed.2d 36 (1980). See also Morgan Guaranty Trust Co. v. American Savings and Loan Assoc., 804 F.2d 1487, 1492 (9th Cir.1986) (While "subsequent legislative history is not conclusive, we are entitled to give it weight when the meaning of the statute and original congressional intent are in doubt").
In the case at bar, the court finds that Congress has not defined "program operating responsibilities." See Greene, 731 F.Supp. at 837. Further, the court concludes that the intent of the original Congress is unclear. As a result, the court affords due weight to the subsequent congressional intent quoted herein and finds that the Secretary's delegation of the exclusion sanction authority to the Inspector General was not a transfer of a program-operating responsibility. Consequently, the Plaintiff's improper delegation argument is without merit and should be dismissed.
B. Defendant's Failure to Publish Intended Statutory Application
In his complaint, the Plaintiff alleges that the Defendant violated the Administrative Procedures Act (APA) when he failed to publish regulations explaining the Inspector General's intended application of 42 U.S.C. § 1320a-7(i)(4). The Plaintiff claims this is critical because neither "first offender" nor "deferred adjudication" is defined in the statute itself, nor in any regulation. The Plaintiff's argument centers on the distinction between a deferred prosecution, which is not covered by § 1320a-7(i)(4), and a deferred adjudication, which is. The Plaintiff asserts that the Inspector General's office did not acknowledge that it distinguished between deferred adjudications and deferred prosecutions until the parties were in front of the Appeals Board, and claims that if he had notice earlier in the proceeding of what constituted a deferred prosecution, then the state court record could have been clarified to avoid the situation now before this court.
The Plaintiff also alleges that the Utah state Medical Fraud Control Unit (MFCU), which is allegedly funded almost entirely by the Defendant upon certification by the Inspector General, should have been aware of the distinction between deferred adjudication and deferred prosecution. The Plaintiff argues that the MFCU should have informed him that the parties were not proceeding under a deferred prosecution in the Utah state court proceeding. It is asserted that notice of such a distinction would not be in the interest of the Inspector General's office because of the incentive the Inspector General's office allegedly has in excluding as many individuals as possible in order to fulfill its quotas. It is this illegal quota system that the Plaintiff believes enticed the Inspector General into creating a system which violates the APA notice requirements contained in 5 U.S.C. § 553(d). The Plaintiff implicitly argues that the APA mandated the promulgation of additional regulations before the Defendant could apply the exclusion authority contained in the 1987 revisions to § 1320a-7.
In 1977, Congress enacted the Medicare-Medicaid Anti-fraud and Abuse Amendments, which required the Secretary to suspend any physician or individual practitioner convicted of a "criminal offense related to such physician's or practitioner's involvement in the Medicare and Medicaid programs." Greene, 731 F.Supp. at 837. This court agrees with the court in Greene when it stated that:
[t]he 1987 amendments simply imposed a five-year minimum period of exclusion for program-related convictions. These *401 provisions are self-executing and do not require the formation of additional regulations prior to their application. Adequate notice and hearing regulations were already in place when Congress enacted the 1987 Amendments.
Id. See also Ct.Rec. 35 at 22.
The Plaintiff also argues that the Defendant, through the MFCU, was under an obligation to inform him during the Utah state court proceeding of the distinction between deferred prosecutions and deferred adjudications. The Plaintiff asserts that if the Defendant published its intended application of the contested statutory provision, he would have documented the record below so that the disposition of his case would not have been characterized as a deferred adjudication. The Plaintiff argues that the Defendant had some unpublished written policy defining deferred adjudication under § 1320a-7(i)(4). In the alternative, the Plaintiff appears to argue that even if there were no formal written internal regulations or guidelines in existence, the Defendant should have published his intended application of the provision.
First, the Defendant denies the existence of any unpublished written policy defining deferred adjudication under § 1320a-7(i)(4). Besides his allegation, the Plaintiff has offered nothing to support his contention that there exist unpublished policies or guidelines defining deferred adjudication. Therefore, the Plaintiff has failed to carry his burden to survive summary judgment on this issue.
The Plaintiff's assertion that the Defendant was under an affirmative duty to publish his views on the intended application of § 1320a-7(i)(4) is also without merit. It is settled that detailed rules and/or regulations are not required for every statutory provision, nor is it required that every word of every statute be defined. As the Supreme Court has stated:
Not every principle essential to the effective administration of a statute can or should be cast immediately into the mold of a general rule. Some principles must await their own development, while others must be adjusted to meet particular, unforeseeable situations. In performing its important functions in these respects, therefore, an administrative agency must be equipped to act either by general rule or by individual order. To insist on one form of action to the exclusion of the other is to exalt form over necessity.
SEC v. Chenery Corp., 332 U.S. 194, 202, 67 S.Ct. 1575, 1580, 91 L.Ed. 1995 (1947); See also American Power & Light Co. v. SEC, 329 U.S. 90, 67 S.Ct. 133, 91 L.Ed. 103 (1946); Pulido v. Heckler, 758 F.2d 503, 506 (10th Cir.1985). However, regulations are required in cases where the statute itself mandates the promulgation of regulations. See Pulido, 758 F.2d at 506.
During oral argument, the Plaintiff asserted that § 1320a-7(c) required the Defendant to publish regulations relating to his intended application of § 1320a-7(a)(1) and § 1320a-7(i)(4). Section 1320a-7(c) provides, in pertinent part:
An exclusion under this section ... shall be effective at such time and upon such reasonable notice to the public and to the individual or entity excluded as may be specified in regulations consistent with paragraph (2).
(Emphasis added). The court finds that § 1320a-7(c) does not require publication of regulations detailing the criteria for exclusion, it only requires notice of the exclusion itself. Further, even if § 1320a-7(c) stood for what the Plaintiff suggests, the language regarding the promulgation of regulations in this section is permissive, not mandatory. Therefore, the Secretary did not violate the APA by failing to promulgate regulations under § 1320a-7(c).
The Plaintiff has pointed to no legitimate statutory provision directing the Defendant to promulgate regulations defining deferred adjudication or distinguishing it from deferred prosecution. The statute itself in § 1320a-7(i)(4) provided the Plaintiff with notice that a "conviction" included participation in a deferred adjudication program. Moreover, even in the absence of explanatory regulations, the distinction between deferred prosecution and deferred adjudication is sufficiently clear. In a deferred prosecution, an agreement is entered *402 into between the prosecutor and the defendant. At the heart of deferred prosecution is an agreement by the prosecutor to delay bringing or prosecuting charges. In a deferred adjudication, there is no such deferral by the prosecutor.
What occurred in the case at bar cannot be characterized as a deferred prosecution because there was no deferral of prosecution. Instead, the charges were brought and a plea was tendered to the Utah court and the court, in effect, reserved ruling on the acceptance of the plea until the terms of the plea agreement had been fulfilled. This type of arrangement can most accurately be described as a deferred acceptance of a plea.
Based on the foregoing, the court concludes that the Defendant did not violate the APA or the Due Process Clause by failing to publish regulations defining "deferred adjudication" or explaining how it differed from a deferred prosecution. Consequently, the court must also reject the Plaintiff's argument that the alleged quota system induced the Defendant into establishing a system that provided insufficient notice concerning the prerequisites for exclusion.
C. Reliance on Unpublished Regulations
The Plaintiff also alleges in his complaint that the Defendant's previously published regulations were only applicable to the pre-1987 statutory provisions. The Plaintiff claims that the Defendant modified these regulations without publication, and at the time of the Plaintiff's "conviction," these regulations remained unpublished.
The APA requires the Defendant to publish regulations relating to the implementation of § 1320a-7, as well as any amendments to the regulations pertaining to that section. 5 U.S.C. § 552(a)(1) provides, in pertinent part:
Each agency shall make available to the public information as follows: (1) Each agency shall separately state and currently publish in the Federal Register for the guidance of the public ... (D) substantive rules of general applicability adopted as authorized by law, and statements of general policy or interpretations of general applicability formulated and adopted by the agency; and (E) each amendment, revision, or repeal of the foregoing.
In his brief, the Defendant claims that no unpublished regulations were relied on in excluding the Plaintiff. It is his position that the Plaintiff was excluded under the mandatory provisions of § 1320a-7 because he had been convicted of a program-related offense as defined in § 1320a-7(i)(4).
Apparently, the "regulations" referred to by the Plaintiff are contained in the Administrative Record, beginning on page 129. These regulations, as the Plaintiff refers to them, are contained in a 14-page report entitled "Civil Monetary Penalty and Exclusion Authorities." This report contains 6 columns of information: (1) the type of conduct prohibited by the statute; (2) the maximum penalty, if applicable; (3) whether exclusion is allowed, and if so, whether it is mandatory; (4) the effective date of the sanction (pre- or post-hearing); (5) the standard of knowledge; and (6) the applicable statutory provision. There is nothing in this "regulation" which sets forth any implementation instructions or any other type of information which could not be gleaned from the face of the statute itself.
In his response to the Defendant's motion for summary judgment, the Plaintiff has not created a genuine issue of material fact concerning the existence of any unpublished regulations, let alone the fact that any unpublished regulations were relied upon by the Defendant in this case. In the Plaintiff's brief, the only discussion of this issue was a bald face allegation that the Defendant had unpublished regulations. This is insufficient to defeat a summary judgment motion. Therefore, the court concludes that the Plaintiff's assertion is without merit and should be dismissed.
D. Neutral Decision-Maker
The Plaintiff asserts that his due process rights were violated in the administrative proceedings below because he was not provided a neutral and detached judge. His allegation again centers on the effect *403 the alleged quota system had on the decisions made by the officers who participated in the proceedings below.
The substance of this issue was previously addressed in this court's Order Granting Defendant's Motion For Summary Judgment (Ct.Rec. 35) where the court held that the decision-makers below did not exercise discretion or fact finding in this matter, for the Plaintiff was excluded under a mandatory statutory provision. Because the Plaintiff's exclusion was mandated under § 1320a-7(a)(1), and the administrative hearing officers had no choice but to exclude him, the Plaintiff was not denied a neutral decision-maker in this case. Irrespective of the administrative decision-makers' holdings, this court found that the Utah state court disposition of the charge levied against the Plaintiff amounted to a "conviction" of a "program-related offense." Consequently, the 5 year exclusion under § 1320a-7(a)(1) was mandated.
E. Challenging Underlying Facts of the Conviction
The Plaintiff contends that the Due Process Clause was violated when he was denied the opportunity to collaterally attack the facts underlying his state court "conviction" and that this deprived him of the opportunity to defend himself without a legal basis for that deprivation. The Plaintiff asserts that the underlying facts and circumstances that gave rise to the tendering of his nolo contendere plea should not be presumed in this proceeding.
Section 1320a-7(a)(1) contains two requirements for mandatory exclusion. There must have been (1) a conviction (2) of a program-related offense. Whether there was a "conviction" necessitates only an examination of the original criminal proceedings. It does not necessitate, nor would it be proper, to reevaluate the underlying facts which gave rise to the conviction. In this case, the court need only examine the proceedings and judgment of the Utah court, which the court has already done, and found that, indeed, the Plaintiff was "convicted." See Ct.Rec. 35.
The second prong of § 1320a-7(a)(1) requires the court to determine whether or not the individual's conviction was for a program-related offense. In order to make this determination, the reviewing court need only examine the "type" of conviction and decide whether it qualifies as a program-related offense under the statute. It is not necessary or proper for the court to delve into the facts surrounding the conviction. To do so would require this court to unnecessarily review a state court criminal proceeding. The role of this court under a § 1320a-7(f) review is not to scrutinize the validity of the underlying conviction; rather, it is to review the validity of the exclusion. As this court held in its Order Granting Defendant's Motion for Summary Judgment (Ct.Rec. 35): "In this case, the nature of the Plaintiff's crime was characterized by the State of Utah. The Inspector General merely concluded that the conviction met the requirement of a program-related crime, a conclusion that involved no fact-finding nor any discretion." Id. at 22.
In sum, the court concludes that the hearing provided under § 1320a-7(f) does not necessitate an evidentiary hearing concerning the underlying conviction. Consequently, the Plaintiff's due process rights were not violated when he was denied the ability to relitigate the facts underlying his state court "conviction."
F. Improper Deference to the Administrative Decision-Maker
The Plaintiff claims that the court applied an improper standard in its Order Granting Defendant's Summary Judgment Motion (Ct.Rec. 35). Specifically, the Plaintiff asserts that the court afforded improper deference to the administrative decision-makers. The court allegedly did this when it found that there was "substantial evidence" for the Defendant to conclude that the Plaintiff participated in a first-offender program, rather than a non-criminal diversion program. The Plaintiff claims that it was improper for the court to grant deference to decision-makers whose conclusions were tainted by a quota system violative of due process.
The court notes that the administrative decision-makers did not engage in any factfinding. *404 Rather, they relied on the facts as set forth in the Utah state court record. Consequently, the court did not and, as a practical matter, could not have given deference to any factual determination made by the Defendant or his agency. The court acknowledges that had the Defendant's agency engaged in fact-finding, or had they exercised any discretion in this matter, the result of this case might well be different. However, the fact is that these decision-makers, the ones allegedly tainted by the quota system, engaged in no discretionary activity that might place in jeopardy the Plaintiff's due process rights. Therefore, even if an illegal quota system was in place, it did not harm the Plaintiff's due process rights because no discretion was exercised in this case, except by the Utah court.
Although this court did state that the Defendant's holding was supported by "substantial evidence," the court stresses that it did not give any deference to the administrative decision-makers. This is partly because of the possible monetary incentive these individuals had in excluding the Plaintiff, and, more importantly, because the court did not have to give these decision-makers any deference. Even if this court were to review this case de novo, it would not have any basis for overturning the Plaintiff's exclusion. Given the facts in the case at bar, the Plaintiff's sanction was mandatory and no decision-maker could have found otherwise.
The Plaintiff also suggests that the court had to grant deference to the administrative decision-makers when it concluded that § 1320a-7(a)(1) (the mandatory provision) applied instead of § 1320a-7(b)(1) (the permissive provision). Although the court has already held that the Plaintiff's conduct mandated exclusion under § 1320a-7(a)(1),[1] it will address the issue again in order to clarify the distinctions between the mandatory and permissive exclusion sections.
Section 1320a-7(a)(1) addresses a narrow type of conviction. That is, one which is related to the delivery of an item or service under the Medicare or Medicaid programs. Section 1320a-7(b)(1), on the other hand, deals with financial crimes in the health care industry in general, thus it is broader in scope than section (a)(1). In other words, section (a)(1) has a requirement that section (b)(1) does not have: a conviction under section (a)(1) must relate to delivery of an item or service under Medicare or Medicaid or any State health care program. Section (b)(1) provides that the Secretary may exclude
[a]ny individual or entity that has been convicted under Federal or State law, in connection with the delivery of a health care item or service or with respect to any act or omission in a program operated by or financed in whole or in part by any Federal, State, or local government agency, of a criminal offense relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct.
Section (b)(1)'s legislative history illustrates Congress' intent that an individual may be excluded from the Medicare and Medicaid programs if he engages in financial misconduct in the private sector or in connection with governmental programs other than Medicare or Medicaid.
Under current law, the Secretary does not have the authority to exclude individuals or entities convicted of criminal offenses which are not related to Medicare or Medicaid or the other State health *405 care programs. This provision would permit the Secretary to exclude persons and entities who have already been convicted of offenses relating to their financial integrity, if the offenses occurred in delivering health care to patients not covered by public programs or if they occurred during participation in any other governmental program.
S.Rpt. No. 100-109, 100th Cong., 1st Sess. 5, reprinted in 1987 U.S.Code Cong. & Admin.News 682, 687. (Emphasis added.) Based on the wording of the statute and its legislative history, the court finds that section (b)(1) was enacted to address an issue that was not covered by the pre-1987 version of section (a)(1). Section (b)(1)'s legislative history illustrates Congress' desire to exclude individuals from Medicaid and Medicare if they engage in any type of financial misconduct connected with the delivery of medical services, even if it had nothing to do with Medicare or Medicaid.
The Plaintiff persists in arguing that the Defendant exercised discretion in deciding to exclude the Plaintiff under § 1320a-7(a)(1), rather than § 1320a-7(b)(1). To that end, the Plaintiff argues that this court afforded the administrative decision-makers improper deference when it agreed that section (a)(1) was the appropriate provision in the Plaintiff's case. The court disagrees.
An exclusion determination under § 1320a-7 is a two-step process. First, the Secretary must determine whether the mandatory provision applies. Under § 1320a-7(a) the Secretary shall exclude individuals who have been convicted of a program-related crime or who have been convicted of patient abuse. If the prerequisites of this section are met, the Secretary is directed by Congress to exclude that individual, and the issue of permissive exclusion becomes moot. It is only after the Secretary determines that the individual's conviction was not for a "program-related crime" that the permissive exclusion statute becomes relevant.
The decision-makers below did not "choose" to apply § 1320a-7(a)(1). Rather, because the Plaintiff's conviction was a program-related offense, they had no choice but to apply the mandatory exclusion provision. This court did not afford the administrative decision-makers any deference when it held that the mandatory exclusion provision was correctly applied in this case. Accordingly, the court concludes that the express language of the applicable statutory provisions indicate that the Secretary had no choice but to exclude the Plaintiff for the 5-year mandatory minimum under § 1320a-7(a)(1).
Because the Plaintiff has failed to established any genuine issues of material fact and the Defendant is entitled to judgment as a matter of law, the Defendant's motion seeking judgment as a matter of law on the remaining issues in the Plaintiff's complaint should be granted.
IT IS HEREBY ORDERED that the Defendant's motion for summary judgment (Ct.Rec. 38) IS GRANTED. The Plaintiff's complaint, and the claims therein, shall be DISMISSED WITH PREJUDICE.
IT IS SO ORDERED.
NOTES
[1] See Ct.Rec. 35. Legislative history also supports the court's finding that the Plaintiff's conviction was for a program-related offense. In 1977, Congress enacted the Medicare-Medicaid Antifraud and Abuse Amendment, which was later amended into its current form in 1987. The Amendment required the Secretary to suspend from participation under the Medicare and Medicaid programs those individual practitioners who have been convicted of a criminal offense relating to such individual's involvement in Medicare and Medicaid. H.Rpt. No. 95-393, 95th Cong., 1st Sess. 3, reprinted in 1977 U.S.Code Cong. & Admin.News 3039, 3042. When discussing the purpose of the Amendment, Congress noted that fraud and abuse can occur in a number of different medical settings. Id. at 3047. Congress went on to state that "program fraud and abuse covers a broad spectrum of practices, ranging from the rendering of services of arguable necessity to such criminal offenses as filing false claims." Id. at 3049-50. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544114/ | 53 F.2d 407 (1931)
THE SNUG HARBOR.
No. 12108.
District Court, E. D. New York.
August 25, 1931.
Howard W. Ameli, U. S. Atty., of Brooklyn, N. Y. (Charles E. Wythe, Sp. Asst. to U. S. Atty., of New York City, and Frederick R. Conway, of Washington, D. C., of counsel), for the United States.
Baird, White & Lanning, of Norfolk, Va., and Kirlin, Campbell, Hickox, Keating & McGrann, of New York City (Charles R. Hickox and Clement C. Rinehart, both of New York City, and Edward R. Baird, Jr., and George M. Lanning, both of Norfolk, Va., of counsel), for claimants.
CAMPBELL, District Judge.
This is a petition filed on behalf of the United States of America, as owner of the steamship Snug Harbor, to limit its liability for the loss of the barges Winstead and Vermillion, and their cargoes.
The facts are as follows:
The steamship Snug Harbor, owned and used by the United States solely as a merchant vessel, while on a voyage from Baltimore, Md., to Portland, Me., came into collision *408 on August 15, 1920, at 9:30 o'clock p. m., with the barge Pottsville in tow of the Covington, and sank at a point about four and a half miles east by north of Montauk Point Light, and became a total loss.
At 5:30 o'clock p. m., on the 14th day of September following, the barges Vermillion and Winstead, loaded with coal and in tow of the tug Barrelton, on a voyage from Norfolk, Va., to Fall River, Mass., without fault of those in charge of the tug or tow, came into contact with the wreck of the steamship Snug Harbor, and as a result were sunk, and with their cargoes became a total loss.
The United States of America, its agents, servants and employees, did not mark by buoy or light the wreck.
There was no affirmative act of abandonment on the part of the United States of America.
The collision of the Snug Harbor with the barge Pottsville occurred in a fog.
The crew of the Snug Harbor was saved, and the master thereafter made his report, in which he stated that the collision occurred one-half mile west, three-quarters south, from Montauk Point gas buoy.
This point is in the ocean at the entrance to Block Island Sound. The point where the Vermillion and the Winstead came into contact with the wreck of the Snug Harbor was in Block Island Sound.
The Snug Harbor was an iron vessel fully loaded with coal, and the master erred in fixing the place of sinking, as he did, six miles from the place where it occurred. The Snug Harbor, in sinking, went over on her side, and left nothing above water to mark the spot. Neither her masts, her funnel, nor any part of her superstructure was visible above the surface.
The wreck of the Snug Harbor lay on the bottom of Block Island Sound, in approximately forty feet of water, about four miles to the eastward of Montauk Point Light, and nine miles westward from the southern-most part of Block Island.
Block Island Sound is a wide roadstead, navigable for nearly its entire distance from shore to shore, for vessels of the largest size, a frequented channelway for north and south bound coastwise vessels going to and returning from Rhode Island and Massachusetts ports, which steer a course to take them over or close to the point of the wreck.
From the time of the sinking of the Snug Harbor on August 15th to the time of the sinking of the Vermillion and the Winstead on September 14th, no effort was made by the United States of America either to mark or reclaim the wreck, other than by the lighthouse tender Tulip.
Upon receipt on August 24, 1920, by the Shipping Board from the operators of the ship, the Coastwise Transportation Company of Boston, of the report of the master of the Snug Harbor of her sinking, inquiry was made from time to time of lobster fishermen habitually using Block Island Sound in an effort to ascertain if any one had information of the location of the wreck.
On August 19th the Lighthouse Service of the Department of Commerce undertook the duty of searching for, finding, and marking the wreck, and inquired of the Shipping Board as to the location of the wreck.
No vessel was assigned exclusively to the duty of searching for the wreck and buoying it, if found, but on August 28th an order was issued to the lighthouse tender Tulip, directing her to search for the wreck while on a regular trip or other business, and buoy it, if found.
On September 1st and 2d the Tulip, while on a voyage between New England ports, cruised the waters in and around Montauk Point for seven hours, in an effort to find the wreck, and did not succeed. The officers charged with the duty of searching had nothing more than general information of the sinking to guide them in finding the obstruction.
They had not communicated with the officers of the Snug Harbor, or with the officers of the barge with which she collided, and there is no evidence to show that the latter had communicated with them.
No effective effort was made by the Lighthouse Service to obtain specific and definite information from any source. Two other vessels were in collision with the wreck, one on the 23d day of August, and another on the 25th day of August, and reports were made at least four days prior to the sinking of the Vermillion and Winstead to the local inspectors and to the Lighthouse Service of these collisions, but no report was made to the Shipping Board thereof. These reports showed as to the barge Stetson that the obstruction was encountered "off Montauk Point," and as to the barge Fall River that the obstruction was encountered six miles east one-fourth south from Montauk Point Lighthouse, and these reports were the only information which came to the petitioner's officers, *409 agents, servants, or employees respecting the location or position of the wreck, other than that given in the report of Capt. Swenson, the master of the Snug Harbor at the time she sank.
After these reports were received, no effort was made to locate the obstruction reported, other than by the Tulip, until the Vermillion and Winstead struck the wreck.
The wreck of the Snug Harbor was at the time of the filing of the petition for limitation of liability herein lying at the place hereinbefore found, within this district and within the jurisdiction of this court.
The facts as found show that the Snug Harbor was sunk in Block Island Sound, and that the barges Vermillion and Winstead came into collision with the wreck of the Snug Harbor and sank with their cargoes.
On the 27th day of May, 1929, the District Court for the Eastern District of Virginia, after trial of the issues, made a final decree against the United States of America, in the consolidated case, on the libels filed by the owners of the barges Winstead and Vermillion, and the owners of their cargoes. From these decrees the United States of America appealed to the Circuit Court of Appeals for the Fourth Circuit, which affirmed the decrees. The Snug Harbor, 40 F.(2d) 27.
These decrees imposed liability because of petitioner's falure to perform a personal, nondelegatable duty, that of buoying the wreck as required by statute.
The instant petition, which was filed on October 29, 1930, seeks a limitation of liability, so established.
The claimants appeared specially, and filed exceptions to jurisdiction, which were overruled by this court (Judge Galston presiding) on December 23, 1930. 46 F.(2d) 143.
The claimants answered, and exceptions to articles 12 and 14 of the answer were filed by the petitioner, on the ground that the issues presented had already been determined by Judge Galston, and that his decision became the law of the case in this court. These exceptions were not brought on for hearing, but were left for disposition on the trial, which was held on June 3, 1931.
In the twelfth article of the answer it is alleged that the Virginia litigation established the personal fault of the petitioner in failing to mark the wreck, as required by the Wreck Statute (33 USCA § 409), and that liability arising from such fault does not come within the scope of the limitation of Liability Act.
In the fourteenth article it is alleged that the Virginia litigation established that the loss of claimants' barges and cargoes occurred with the privity and knowledge of the petitioner.
The complete record of the Virginia litigation was not before Judge Galston when he heard the exceptions of the claimants to jurisdiction, his decision was thereon, and not a decision on the exceptions to articles 12 and 14 of the answer.
All that was before him with reference to that litigation was an allegation that the petitioner had been sued in Virginia under the Suits in Admiralty Act (46 USCA §§ 741-752), and had been adjudged liable to pay certain libelants for damages for the loss of the barges Winstead and Vermillion, and their cargoes.
No facts and circumstances were alleged with respect to the Virginia proceedings to enable the court to determine what the nature of the liability was that had been adjudged against the petitioner in Virginia.
The full record of the Virginia litigation is now before this court, and a different situation is presented there than on the hearing of the exceptions, and I cannot hold that with reference to such exceptions this court, in passing on the exceptions to the answer, is bound by that decision. Post v. Pearson, 108 U. S. 418, 2 S. Ct. 799, 27 L. Ed. 774; Roberts & Co. v. Buckley, 145 N. Y. 215, 39 N. E. 966; The Tenbergen (D. C.) 48 F.(2d) 363.
As the exceptions in question go to the root of the case, they will be generally considered in this opinion on the whole evidence offered on the hearing of this petition.
In view of the decision on the exceptions to the jurisdiction, the question now before this court is narrowed down to the single issue, whether, upon the facts found, the neglect and failure of the petitioner to mark and buoy the wreck of the Snug Harbor, upon which liability was predicated, occurred without the privity or knowledge of the petitioner, within the meaning of the Limitation Statute?
The claimants contend that the court in the Virginia litigation decided that the petitioner was liable for failure to perform the nondelegatable duty of buoying the wreck, and that the effect of the decision is to impose personal liability, and this court cannot consider whether it is correct or incorrect.
*410 With that contention, as a whole, I cannot agree, because I am unable to find that the question now litigated, the right of the owner of the Snug Harbor to limitation of liability, was before the courts in the Virginia litigation.
The courts in the Virginia litigation have found, and I find, that the Wreck Statute applies to the open waters of Block Island Sound where the Snug Harbor sank, that there is no evidence of any formal abandonment by the petitioner of the wreck, and that the request by the petitioner to the Lighthouse Service, to mark the wreck, was not an abandonment thereof which released the petitioner from its obligation to find and mark the wreck.
The courts in the Virginia litigation found that the failure and neglect of the petitioner to mark and buoy the wreck imposed liability under the Wreck Statute.
The Wreck Statute, Act of March 3, 1899, c. 425, § 15, 30 Stat. 1152, now title 33, section 409, U. S. Code (33 USCA § 409), in so far as it is necessary for consideration in this case, provides as follows:
"§ 409. Obstruction of Navigable Waters by Vessels; Floating Timber; Marking and Removal of Sunken Vessels. It shall not be lawful to tie up or anchor vessels or other craft in navigable channels in such a manner as to prevent or obstruct the passage of other vessels or craft; or to voluntarily or carelessly sink, or permit or cause to be sunk, vessels or other craft in navigable channels; * * * And whenever a vessel, raft, or other craft is wrecked and sunk in a navigable channel, accidently or otherwise, it shall be the duty of the owner of such sunken craft to immediately mark it with a buoy or beacon during the day and a lighted lantern at night, and to maintain such marks until the sunken craft is removed or abandoned, and the neglect or failure of the said owner so to do shall be unlawful; and it shall be the duty of the owner of such sunken craft to commence the immediate removal of the same, and prosecute such removal diligently, and failure to do so shall be considered as an abandonment of such craft, and subject the same to removal by the United States as hereinafter provided for." Section 19 of the Act of March 3, 1899, supra, now title 33, section 414, U. S. Code (33 USCA § 414), in so far as it is necessary for consideration in the instant suit, provides as follows:
"§ 414. Removal by Secretary of Sunken Water Craft Generally. Whenever the navigation of any river, lake, harbor, sound, bay, canal, or other navigable waters of the United States shall be obstructed or endangered by any sunken vessel, boat, water craft, raft, or other similar obstruction, and such obstruction has existed for a longer period than thirty days, or whenever the abandonment of such obstruction can be legally established in a less space of time, the sunken vessel, boat, water craft, raft, or other obstruction shall be subject to be broken up, removed, sold, or otherwise disposed of by the Secretary of War at his discretion, without liability for any damage to the owners of the same. * * *"
The Wreck Statute, supra, is mandatory, and imposed a duty on the owner to mark and buoy the wreck, and, if the statute be construed most favorably to the petitioner, as in the Virginia litigation, as creating an obligation only when the owner has knowledge of the fact of the wreck, and that there is no liability if the wreck cannot be found by the exercise of due diligence, the petitioner cannot escape liability, as the owner knew the fact of the wreck, and the wreck could have been found by the exercise of due diligence; and on all the evidence, given both in the Virginia litigation and orally on the trial herein, it appears that there was an almost absolute lack of diligence.
The petitioner relied solely upon the report of the master, and did nothing effective but to attempt to delegate its duty to the Lighthouse Service.
The report of the master of the Snug Harbor showed the sinking, in a fog, of the vessel at a point near the entrance to a navigable and much-used channel, where many vessels were constantly passing and in great danger of being sunk, and the circumstances surrounding the sinking were sufficient in themselves to have put the Shipping Board upon notice that there was uncertainty as to the place of sinking.
In addition to which there was the inquiry, on August 19th, by the Lighthouse Service of the Shipping Board as to the location of the wreck. This showed that the Lighthouse Service did not consider the wreck at sea. There was also the fact, well known to seafaring people, that there had been two collisions with a wreck off Montauk Point, on August 23d and 25th, within ten days after the sinking of the Snug Harbor, and about three weeks before the sinking of the barges Vermillion and Winstead.
There was also the investigation by the local inspectors which is customary in such *411 cases, and an examination of the record of that investigation would have shown the uncertainty as to the place of the sinking of the Snug Harbor.
The petitioner through its Shipping Board could not relieve itself from liability simply by requesting the Lighthouse Service to find and buoy the wreck, as the finding of the wreck was not the duty of the Lighthouse Service.
The duty of the owner was personal and not delegatable. The Anna M. Fahy (C. C. A.) 153 F. 866; The Macy (C. C. A.) 170 F. 930; Red Star Towing & Transportation Co. v. Woodburn (C. C. A.) 18 F.(2d) 77; Sullivan v. P. Sanford Ross, Inc. (C. C. A.) 263 F. 348.
The Wreck Statute, supra, is not in conflict with section 4283 of the Revised Statutes, now title 46, section 183, U. S. Code (46 USCA § 183), but is in harmony with its provisions, for the duty imposed on the owner by the Wreck Statute is a personal one. Eastern S. S. Corp. v. Great Lakes Dredge & D. Co. (C. C. A.) 256 F. 497.
The Wreck Statute is a criminal statute (Eastern S. S. Corp. v. Great Lakes Dredge & D. Co., supra; Sullivan v. P. Sanford Ross, Inc., supra), and the Limitation Statute cannot have any effect in limiting its provisions.
The Limitation of Liability Statute does not permit an owner to limit his liability on personal contracts. Luckenbach v. McCahan Sugar Co., 248 U. S. 139, 39 S. Ct. 53, 63 L. Ed. 170, 1 A. L. R. 1522; Pendleton v. Benner Line, 246 U. S. 353, 38 S. Ct. 330, 62 L. Ed. 770; Capitol Transp. Co. v. Cambria Steel Co., 249 U. S. 334, 39 S. Ct. 292, 63 L. Ed. 631.
Petitioner's advocate argues at length that, because limitation of liability may be had in case of a fire, even where exemption of liability could not be had under the Fire Statute, and cites United States v. Butler (D. C.) 278 F. 677, limitation of liability may likewise be had in case of liability imposed by the Wreck Statute.
I am unable to agree with that contention, for the reason that the Fire Statute, section 4282 Revised Statutes, now title 46, section 182, U. S. Code (46 USCA § 182), was derived from the Act of March 3, 1851, ch. 43, § 1, 9 Stat. 635, and is not penal but remedial. Chamberlain v. Western Trans. Co., 44 N. Y. 305, 4 Am. Rep. 681.
It is logical to relieve the shipowner from liability for loss or damage by fire, unless such fire is caused by the design or neglect of the owner, and also to allow limitation of his liability when exemption from liability is not allowed because of the neglect of the owner, for the reason that the Fire Statute is a remedial statute not one which is penal, whereas the Wreck Statute is criminal in its nature, and limitation of liability should be refused where the Wreck Statute is violated or a premium would be placed on a violation of law.
Neglect alone predicated on the conduct of the owner does not preclude limitation of liability, but the violation of a statute criminal in its nature does preclude limitation of liability.
The Limitation of Liability Statute, section 4283 Revised Statutes, now title 46, § 183, U. S. Code (46 USCA § 183), provides as follows:
"§ 183. Liability of Owner Not to Exceed Interest. The liability of the owner of any vessel, for any embezzlement, loss, or destruction, by any person, of any property, goods, or merchandise, shipped or put on board of such vessel, or for any loss, damage, or injury by collision, or for any act, matter, or thing, loss, damage, or forfeiture, done, occasioned, or incurred without the privity, or knowledge of such owner or owners, shall in no case exceed the amount or value of the interest of such owner in such vessel, and her freight then pending."
The intent of Congress in passing this statute was to enable the vessel owner to limit his risk to his interest in the ship, in respect to all claims arising out of the conduct of the master and crew, and for acts done without his privity or knowledge, while leaving him liable for his own fault, neglect, and contracts. The 84-H (C. C. A.) 296 F. 427, certiorari denied 264 U. S. 596, 44 S. Ct. 454, 68 L. Ed. 867.
Privity or knowledge as used in section 4283, Revised Statutes, supra, imports actual knowledge of the things causing or contributing to the loss, or knowledge, or means of knowledge, of a condition of things likely to produce or contribute to the loss without adopting proper means to prevent it. Petition of Canadian Pac. Ry. Co. (D. C.) 278 F. 180.
Under this definition, the petitioner would not be entitled to limit its liability, even if limitation were possible, where the loss was occasioned by violation of the Wreck Statute, supra, for the reason that the petitioner knew of the sinking of the Snug Harbor, *412 and was put on notice that the position of the wreck had not been properly given by the master, and, knowing the danger to shipping of a wreck in a frequented channelway, took no effective action to find, mark, and buoy the wreck, but allowed the wreck to remain a menace to navigation, in an undiscovered position, unmarked, not buoyed, and unlighted and likely to damage shipping, and failed to adopt proper means to prevent it. See The Drill Boat No. 4 (D. C.) 233 F. 589; Dempsey v. Maryland Transp. Co. (D. C.) 269 F. 665, affirmed (C. C. A.) 279 F. 94.
There is a further restriction on the right to limit which would require more careful consideration, if there was a right to limit, where the damage had resulted from a violation of the Wreck Statute, supra.
The damages in question were occasioned by a wreck which had been submerged for about thirty days after the sinking ending her voyage, and limitation of liability is limited to limitation for disasters occurring on a particular voyage [The Pelotas (D. C.) 21 F.(2d) 236]; and for such loss or damage as occurs on the last voyage preceding the filing of the petition, or on the voyage on which the vessel is lost [The Alpena (D. C.) 8 F. 280].
No case has been cited, and I have been unable to find any, in which limitation of liability has been allowed to an owner for loss occasioned by noncompliance with the Wreck Statute; but limitation of liability has been refused to an owner for loss occasioned by a noncompliance with that statute. Eastern S. S. Corp. v. Great Lakes Dredge & D. Co., supra.
I therefore conclude as a matter of law that the petitioner, with knowledge of the wreck of the steamship Snug Harbor, and chargeable with notice of the uncertainty of her location, took no effective steps to ascertain the position of the wreck and perform the mandatory duty imposed on it by the Wreck Statute, to mark, buoy, and light the wreck, but attempted to delegate to the Lighthouse Service the duty of the petitioner to mark, buoy, and light the wreck, which it could not delegate; and that, as a result of the failure of the petitioner to perform its said nondelegatable duty to mark, buoy, and light the wreck, the barges Vermillion and Winstead collided with it and were sunk with their cargoes, liability for which had been imposed in the Virginia litigation upon the petitioner, because of the failure of the petitioner, with notice, to obey the Wreck Statute, and mark, buoy, and light the wreck.
The petitioner is not entitled to limit its liability.
A decree may be entered in favor of the claimants against the petitioner, dismissing the petition, with costs.
Submit findings of fact and conclusions of law for the assistance of the court.
Settle decree on notice. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544115/ | 183 Pa. Superior Ct. 432 (1957)
Commonwealth
v.
Newcomer, Appellant.
Superior Court of Pennsylvania.
Argued April 10, 1957.
June 11, 1957.
Before RHODES, P.J., HIRT, GUNTHER, WRIGHT, WOODSIDE, ERVIN, and WATKINS, JJ.
*433 Edward F. Peduzzi, with him Myers, Taylor & Peduzzi, for appellant.
William P. Kelly, Assistant District Attorney, with him David C. Wolfe, District Attorney for appellee.
OPINION BY GUNTHER, J., June 11, 1957:
Charles E. Newcomer, appellant, was charged with and convicted of the crime of incestuous statutory rape upon his daughter, Diana Newcomer, then twelve years of age. Some of the offenses involved were alleged to have been committed at home, and on one occasion in an automobile while returning his daughter from piano lessons.
The Commonwealth's case was established by the girl who testified that her father had intercourse with her several times over a period from June to August, 1955. Mrs. Alice Newcomer, wife of the defendant, testified that in the latter part of September, 1955, she had difficulties at home, as a result of which she intended to leave defendant and so informed the children. She told the children that they were to stay with the father as he was better able to provide for them. On Sunday, October 2, 1955, as she was preparing to leave, Diana asked her not to leave and told her of the events which occurred between her and her father. The following day, Diana was examined by Dr. Bennett who testified that in his opinion she had been penetrated a number of times as there was no trace of the hymen. Dr. Ebandjieff examined the child on Sunday, October 2, 1955, and he testified that he *434 found the vaginal membrane intact and some slight bruises on her thighs.
Mrs. Newcomer testified that she worked at Weaver's Restaurant from July until October, 1955; that she worked different shifts so as to coincide with the shifts worked by her husband, and that during the times she worked, the children were left in the care of her husband.
Defendant took the stand and denied the charges. He also, in the form of an alibi, offered the testimony of Mrs. Hilda Weaver to show that Mrs. Newcomer was home at the time of the alleged first offense in June, and that Mrs. Newcomer did not begin work in her restaurant until the last Saturday in July. Defendant also offered testimony to the effect that while his daughter was taking her piano lesson on August 17, 1955, he took his car to a garage for repairs; that he helped the mechanic as a result of which his clothing and hands were greasy and dirty; that when he returned with the little girl, his wife was at home, and that at that time she made no outcry. He testified, further, that his wife threatened to put him in jail on several occasions. On cross-examination Diana admitted that she, at times, was angry at her father for his refusal to allow the use of lipstick and nail polish. Several character witnesses were offered as to his reputation for good moral conduct in the community.
The evidence was conflicting but the jury returned its verdict of guilty. The jury was polled and each juror affirmed the verdict. Some time thereafter, affidavits were obtained from two members of the jury to the effect that they voted for a verdict of guilty because they believed and were informed that the verdict had to be unanimous and that they did not know that the court could have been informed of a disagreement; that they did not know they had a right to change their *435 verdict at the time of the poll and could have stated that they found the defendant not guilty.
No complaint is made about the charge of the court or about the admissibility of the evidence. Appellant here contends that the motions for a new trial and in arrest of judgment should have been granted because the evidence was conflicting, indefinite, insufficient, unreliable and uncorroborated. He further contends that the affidavits of two jurors, obtained some time after the jury was discharged, should have been considered as a reason for granting the motions.
The testimony of the victim was positive as to the acts of rape notwithstanding uncertainty as to exact dates. She was a sixth grade student in the local school and no objection was raised as to her competency at the time of trial. She stated she did not complain because her father had threatened her. Her failure or inability to pinpoint exact dates and circumstances as a girl of twelve (thirteen at the trial) is a human frailty which adults possess as well. The proof of a date other than that contained in the indictment is not normally fatal. The Commonwealth can prove any other time, prior to the indictment, the commission of specified acts so long as they come within the statute of limitations: Commonwealth v. Sutton, 171 Pa. Superior Ct. 105, 90 A. 2d 264; Commonwealth v. Zeigler, 164 Pa. Superior Ct. 82, 63 A. 2d 128; Commonwealth v. Bridges, 82 Pa. Superior Ct. 92.
The character of the testimony making out a prima facie case, even though conflicting and somewhat vague, is not a reason for granting a new trial. Such testimony may affect credibility which is always for the finders of fact: Commonwealth v. Ramstedt, 113 Pa. Superior Ct. 548, 173 A. 772; Obici v. Third Nat. Bank & Trust Co., 381 Pa. 184, 112 A. 2d 94; Nanty-Glo Boro. v. Amer. Surety Co., 309 Pa. 236, 163 A. 523. Likewise, *436 the failure to make an outcry or the lack of corroboration cannot be attacked in this type of proceeding. A conviction for incestuous statutory rape may be supported by the victim's uncorroborated testimony, and since the element of force is not involved in the offense, evidence of an outcry or a prompt revealing of the criminal act or acts is not required. Commonwealth v. Allabaugh, 162 Pa. Superior Ct. 490, 58 A. 2d 184; Commonwealth v. Ebert, 146 Pa. Superior Ct. 362, 22 A. 2d 610.
The practice of polling the jury after verdict goes back to the common law. However, we know of no rule of law which makes it mandatory that before a jury is polled, the trial judge instructs the jury of their right to dissent from the verdict or to individually change its mind. Such a requirement would, in effect, be an open invitation to do so which could nullify the effects of an orderly trial. This does not mean that a juror, if not convinced of his previous action in the jury room, or because of possible pressure brought to bear upon him, cannot change his mind. We merely say that the trial judge is not duty bound to invite the jury to do so.
The affidavits produced were properly rejected by the court below. The verdict as recorded is the verdict of the jury and no member of that jury may be permitted to impeach or to alter or amend such a verdict after separation and discharge: Commonwealth v. Cano, 182 Pa. Superior Ct. 524, 128 A. 2d 358; Commonwealth v. Smart, 368 Pa. 630, 84 A. 2d 782; Commonwealth v. Johnson, 359 Pa. 287, 59 A. 2d 128; Commonwealth v. Curry, 298 Pa. 363, 148 A. 508. Likewise, the calling of jurors as witnesses for any purpose in post conviction proceedings is to be avoided if at all possible. Commonwealth ex rel. Howard v. Claudy, 175 Pa. Superior Ct. 1, 102 A. 2d 486.
*437 The judgment of sentence is affirmed, and the record is remitted to the court below, and it is ordered that defendant appear in the court below at such time as he may be called, and that he be by that court committed until he has complied with the sentence, or any part thereof, which has not been performed at the time the appeal was made a supersedeas. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544119/ | 68 B.R. 639 (1986)
In re BLACKFORD FARMS, INC., Debtor.
Bankruptcy No. 85-00839C.
United States Bankruptcy Court, N.D. Iowa.
December 18, 1986.
John M. Titler, Cedar Rapids, Iowa, for Land Bank.
Rush M. Shortley, Cedar Rapids, Iowa, for debtor.
FINDINGS OF FACT, CONCLUSIONS OF LAW and ORDER re: Section 507(b) Superpriority Claim
MICHAEL J. MELLOY, Bankruptcy Judge.
The matter before the Court is the application of Federal Land Bank of Omaha (Land Bank) for allowance of administrative claims pursuant to 11 U.S.C. Section 507(b). This is a core proceeding pursuant to 28 U.S.C. Section 157(b)(2)(B).
Having considered all pleadings and briefs, the Court makes the following Findings, Conclusions, and Order pursuant to F.R.B.P. 7052.
FINDINGS OF FACT
The Debtor filed its Chapter 11 Petition on April 19, 1985. Land Bank holds a first mortgage lien against approximately 2,649 acres of farmland owned and operated by the Debtor. Land Bank filed its first motion for relief from the automatic stay, imposed pursuant to 11 U.S.C. Section 362(a) on June 14, 1985. It was stipulated by the parties that the value of the real estate, as of the date of filing, as well as the date of the first motion for relief from stay (June 14, 1985) was $4,750,000.00. Land Bank's first motion for relief from stay was denied by the Court on July 9, 1985.
A second motion for relief from stay was filed October 9, 1985. That motion was resolved pursuant to a stipulation between the parties and approved by the Court on November 7, 1985. Pursuant to that stipulation, the Debtor paid $300,000.00 to the Land Bank as adequate protection. A subsequent motion to lift stay has been filed by Land Bank. By agreement of the parties, that motion has been continued to be heard together with the confirmation hearing scheduled in connection with Debtor's proposed Plan of Reorganization. That *640 confirmation hearing is scheduled to be held in approximately 30 days.
The parties have also stipulated the present value of the real estate which secures the Land Bank debt is $3,500,000.00. The issue before the Court is the treatment of the decline in value from the $4,750,000.00 value at the date of filing to the present value of $3,500,000.00.
DISCUSSION AND CONCLUSIONS OF LAW
The value of the Debtor's real estate mortgaged to Land Bank has declined $1,250,000.00 since the bankruptcy petition was filed. Land Bank received $300,000.00 from the Debtor as a payment of adequate protection, but now seeks to recover the remaining $950,000.00 as a superpriority claim pursuant to Section 507(b).
This section provides:
If the trustee, under Section 362, 363, or 364 of this title, provides adequate protection of the interest of a holder of a claim secured by a lien on property of the debtor and if, notwithstanding such protection, such creditor has a claim allowable under subsection (a)(1) of this section arising from the stay of action against such property under Section 362 of this title, from the use, sale, or lease of such property under Section 363 of this title, or from the granting of a lien under Section 364(d) of this title, then such creditor's claim under such subsection shall have priority over every other claim under such subsection.
More clearly put, Section 507(b) simply provides that where adequate protection has been extended to a secured creditor and later proves to be inadequate, the creditor then becomes entitled to a superpriority administrative expense claim to the extent that the proffered adequate protection was insufficient. In re Mutschler, 45 B.R. 494, 496 (Bkrtcy D.N.D.1984). Such a superpriority claim is given a priority over every other allowable administrative claim. 3 Collier on Bankruptcy Paragraph 507.05, at 507-47 (15th Ed.1986).
Considering the language of Section 507(b) and the numerous cases applying it to award superpriority treatment to secured creditors, it would be easy for the Court to decide this case in favor of Land Bank. However, since Section 507(b) treatment is linked to the concept of adequate protection, the Debtor correctly raises the complicating issue of the effect on Section 507(b) of In re Ahlers, 794 F.2d 388 (8th Cir.1986).
One of the essential holdings of Ahlers is that in providing adequate protection, the Bankruptcy Court must look to underlying state law as well as the practical realities of foreclosure and resale of real estate. Ahlers also provides a formula for calculating the appropriate starting date for adequate protection payments. In essence, Ahlers is a "but for" analysis of what would have happened had bankruptcy not intervened. In re Offerman Farms, Inc., 67 B.R. 279, 282 (Bkrtcy.N.D.Iowa 1986). In the context of Section 507(b), the Debtor argues that Ahlers requires the Court to determine the date, under Iowa law, that the Land Bank could actually liquidate its collateral and receive its value, i.e., to calculate the appropriate starting date for adequate protection, before the Court can conclude that Land Bank has suffered an insufficiency of adequate protection which is subject to Section 507(b) treatment.
To reach such a conclusion, as Debtor urges, requires taking Ahlers a step beyond its narrow holding. Although Ahlers gives direction in determining when a secured creditor is entitled to lost opportunity costs, 794 F.2d at 305, it is not entirely clear that the delay in foreclosure and reinvestment analysis is also to apply to the determination of adequate protection which compensates for decline in collateral value. The phrase "adequate protection" is nearly always used without reference to the context that lost opportunity costs are the subject of the litigation. Thus, if read broadly, Judge Heaney's opinion can support such an approach where decline in collateral value is at issue. But in addition, *641 footnote 13 provides insight into how broadly the court in Ahlers views the application of the foreclosure and reinvestment analysis:
[T]he banks will be protected from falling values from the date that they could obtain possession of the property until the plan is confirmed . . . and this period should ordinarily be more than sufficient to obtain confirmation or rejection of a plan. As for the loss that occurs during the redemption period, banks unfortunately will have to absorb this loss with or without a bankruptcy proceeding. Indeed, if a feasible plan is submitted and approved, the banks may realize more under reorganization than they could under liquidation. This opinion simply recognizes reality.
Ahlers, 794 F.2d at 398, Fn. 13 (emphasis added).
At least one Bankruptcy Court in this Circuit finds the language of footnote 13 convincing. In re Asbridge, 66 B.R. 894, (Bkrtcy.D.N.D.1986) holds that a secured creditor seeking relief from stay is not entitled to adequate protection for decline in value of real estate at least until the creditor would likely have been able to sell the property, a time which the Court determines is no earlier than the end of the 12 month redemption period following foreclosure. In applying the "but for" analysis of Ahlers, Judge Hill reasons that the creditor would still have suffered losses from decline in value and delay for foreclosure and reinvestment outside of bankruptcy. Asbridge, 66 B.R. at 902.
Further support for adopting Debtor's approach to adequate protection in the Section 507(b) context is found in In re Callister, 15 B.R. 521 (Bkrtcy.D.Utah 1981). In Callister, the Court expressly considers whether the loss in collateral value, previously the subject of an adequate protection stipulation, is attributable to the automatic stay, or would have occurred regardless of Bankruptcy. Id. at 530-31. Judge Mabey here relies on his earlier opinion in In re Alyucan Interstate Corp., 12 B.R. 803, 808 (Bkrtcy.D.Utah 1981) for the proposition that some declines in collateral value, such as those which are unavoidable with or without the automatic stay, may not be compensable via adequate protection. Callister, 15 B.R. at 530. In Callister, Judge Mabey adopts a balancing approach, and considers the equities of the case, the manner in which adequate protection was provided, and the reasons why adequate protection failed. In deciding whether the creditor should receive Section 507(b) treatment for loss in collateral value due to market forces, Judge Mabey examines the foreseeability of these market forces at the time of the adequate protection stipulation. Id. at 553.
Such an approach to Section 507(b) leaves room for debtor and creditor to demonstrate whether loss in value would have occurred regardless of bankruptcy. It is consistent with Judge Hill's reading of Ahlers in Asbridge, and the Court finds it persuasive. Thus, the Court concludes that an Ahlers analysis of Land Bank's right to adequate protection is relevant to a determination of Land Bank's Section 507(b) claim. Accordingly, before any loss in the value of the Debtor's farmland can be measured, the Court must calculate (1) the starting date, or the date of Land Bank's motion for relief from stay, and add thereto (2) the usual delays of foreclosure, sale, and reinvestment under Iowa law. Ahlers, 794 F.2d at 395.
The Court concludes that the starting date for purposes of this analysis is June 14, 1985. Though this is not the stay motion which resulted in the parties' adequate protection stipulation, it is the date when Land Bank first acted to exercise its right to possession of the collateral or adequate protection, and thus is the proper date under Ahlers. Id. at 395, fn. 6.
On the calculation of foreclosure, sale, and reinvestment delays, the debtor argues that despite important differences regarding the rights of possession during redemption between the Minnesota law applicable in Ahlers, and the Iowa law applicable here, the practical result is the same: the mortgagee will be the purchaser at the *642 sheriff's sale, will be unable to sell it during the redemption period, and thus will gain no benefit from sale and reinvestment for at least 15 months from its petition of foreclosure. Debtor's Brief at 14. Consequently, Debtor would conclude that no Section 507(b) determination can now be made. However, the Court is not willing to adopt the Debtor's assumption that Land Bank will be unable to sell the real estate during redemption. This Court considers this issue to be one in need of factual development in circumstances in which it is clearly presented and actually litigated. Consequently, before reaching a final determination of Land Bank's right to adequate protection under Ahlers, the Court will schedule a hearing in this case, allowing the parties to offer evidence on the issue of the usual delays of foreclosure, sale, and reinvestment under Iowa law.
One final conceptual problem warrants brief attention. In adopting, for purposes of Section 507(b) superpriority treatment, the Ahlers calculation for purposes of adequate protection of the value of real estate, the Court acknowledges the existence of the troublesome "double stay". This is the potential effect on a creditor that could arise if, after waiting for adequate protection payments through the estimated foreclosure, sale, and reinvestment period, the stay is lifted without a plan being confirmed. Ahlers assumes a plan will be confirmed and the creditor will receive the same under the plan as the creditor would receive through foreclosure. However, in many instances, confirmation is denied and the stay is lifted pursuant to Section 362(d), or the case is eventually dismissed and the stay lifts pursuant to Section 362(c). In those circumstances, the creditor faces the further delays of the actual foreclosure, sheriff's sale and redemption period; hence the so-called double stay.
This Court will take up the issue of what protection, if any, Land Bank is entitled to, on account of the "double stay", at the hearing on foreclosure delays.
ORDER
Final determination of Land Bank's right to Section 507(b) superpriority treatment will await further hearing on the issue of the usual delays of foreclosure, sale, and reinvestment of real estate under Iowa law and the protection to be afforded on account of the "double stay."
SO ORDERED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545025/ | 235 A.2d 99 (1967)
STATE
v.
Anthony A. QUATTROCCHI
Ex. No. 10849.
Supreme Court of Rhode Island.
November 14, 1967.
Herbert F. DeSimone, Attorney General, Donald P. Ryan, Assistant Attorney General, for plaintiff.
Leo Patrick McGowan, Richard P. Kearns, for defendant.
*100 OPINION
JOSLIN, J.
The defendant, indicted and tried for manslaughter, was found guilty by a jury in the superior court. After his motion for a new trial was denied, he brought his bill of exceptions to this court.
Shortly after midnight on November 24, 1963, defendant met the decedent, Docanto, in a parking lot adjacent to Samson's diner in Pawtucket. An argument developed and a fight followed. The police were called, but by the time they arrived defendant had left the scene. They found Docanto lying face down in a shallow pool of water. He was dead. The cause of death as testified to by the doctor who performed the autopsy was that "death was due to drowning following the receipt of several blunt force injuries to the head."
Later that morning three persons who had been with defendant at or about the time of the killing were apprehended by the *101 police and thereafter questioned at the police station. Each signed a separate statement. The next afternoon defendant voluntarily went to the police station and he too was interrogated. Upon completion of their investigation, the police charged defendant with the homicide and his conviction followed.
At the outset we summarily dispose of defendant's contentions that there were reversible errors in the allegedly improper manner in which the trial justice first questioned and later rebuked a defense witness, and in the state's having called as a witness a person whom the prosecutor knew or had reason to anticipate would invoke a constitutional claim of privilege. Those contentions, however meritorious they may be when stated in the abstract as they have been by defendant, are not only of doubtful validity in this case, but are not properly before us.
Under our long settled and well-established appellate procedures, we limit our review in criminal cases[1] to rulings made in the course of a trial to which exceptions have been properly reserved. It is the exception which enables a party to bring upon the record that he has made a legal objection to a ruling; and that exception must relate to a specific ruling or decision. A blanket or a general exceptionwill not suffice. State v. Amaral, 47 R.I. 245, 132 A. 547; State v. Braica, 78 R.I. 32, 78 A.2d 374; State v. Mastracchio, 78 R.I. 496, 82 A.2d 889; State v. Ruggiero, 93 R.I. 241, 174 A.2d 555. Here, defendant neither in his brief nor in his oral presentation, pointed to any specific rulings or exceptions which are referable to the conduct he now finds objectionable and to which he so streneously protests. In these circumstnaces there is nothing for us to review.
He contends also that the prosecutor's argument to the jury exceeded the bounds of propriety and thereby deprived him of a fair and impartial trial. The nature and extent of the limitations binding upon a prosecutor when he argues to a jury were considered by us at length in State v. Kozukonis, R.I., 214 A.2d 893, 897. The sum of our holding was that a prosecutor may express his belief in that guilt of an accused so long as it is based on the evidence; he is prohibited from expressing any such belief if it will reasonably permit the jury to infer that it stems from reasons or knowledge outside of the record.
In this case defendant finds impropriety in he following portion of the prosecutor's summation to the jury:
"* * * Call this case as you conscientiously believe it should be called, if you do, justice will triumph again today in Rhode Island, because in my judgment, Mr. Foreman and ladies and gentlemen of the jury, on the basis of the law, and on the basis of the credible evidence that you have heard in this case, your verdict should be a verdict that has no other alternative than that the defendant, Anthony A. Quattrocchi, is guilty as charged." (italics ours)
True, the prosecutor appealed to the jury to find defendant guilty as charged. That appeal, however, was premised, not on anything outside of the record or otherwise peculiarly within his own knowledge, but on the credible evidence which had been presented in the case. We find nothing in that argument which trespasses beyond the permissible bounds set out in State v. Kozukonis, supra.
More troublesome than the foregoing contentions is defendant's further claim that the trial justice abused his discretion by permitting the state to use for impeachment purposes the prior statements of Frank Bianchini, George Bianchini, and James *102 Landi, defendant's three companions on the morning of November 24th.
The defendant, in his argument as well as in his brief, treated his various exceptions to the rulings made to the admission of the pretrial statements of each of these witnesses as raising identical legal issues; he used Frank's testimony to pinpoint those issues. We follow his lead and do likewise.
Frank was the first of the three to be called by the state and took the witness stand on May 26, 1965. Notwithstanding that only 18 months had intervened between the date of the killing and his appearance in court, his memory of what he had seen and heard on the morning of the killing had dimmed. He remembered having seen defendant on the Samson's diner parking lot talking to a stranger on the morning of November 24th, and that he was a passenger in an automobile in which defendant, shortly after the parking lot incident, was driven from the vicinity of Samson's diner. He was unable to recall, however, whether he had seen defendant engage in a fight on the parking lot or whether, while riding in the automobile, he had heard defendant discuss or in any way refer to the killing.
At this juncture of the examination, the prosecutor handed the witness a statement dated November 24, 1963 at 6:00 a.m. It was identified as having been prepared by the police following the witness's interrogation in the early morning hours of the 24th and Frank admitted having signed it. After examining and reading the statement, he insisted that it in no way refreshed his recollection of the events of that morning, and he also said that "Most of the stuff is all untrue" and that "* * * it mixes up most of my recollection of what happened, because most of these things are lies."
Thereupon, the prosecutor, without first claiming surprise, read aloud in the jury's presence those portions of the statement in which the witness purportedly quoted defendant as having said as they were driving in Landi's automobile: "I think that I killed him, he's laying [sic] face down in the puddle," and again, "We sat in this car talking about what had happened. Quattrocchi then said again, that he thought he had killed a guy. I asked Quattrocchi what he had hit the guy with, a stone. Quattrocchi said, Don't ever say I hit anybody with anything."
The witness, although agreeing what had been read in fact appeared in the statement, denied having heard defendant make those comments, and in addition attempted during cross-examination to explain what appeared by saying that he had signed the statement without having first read it, and that the police in purporting to quote him had fabricated.
The question is whether these purported pretrial statements of the witness were admissible under the rule of evidence which prohibits a party from impeaching his own witness by proof of a prior inconsistent statement. It is troublesome, not because the answer is doubtful, but because the state's attorney and defense counsel, both experienced trial counsel, are completely at odds in their understanding of the nature and extent of our impeachment rule. It is for this reason that our discussion is more detailed than it might otherwise be.
The rule's historical origins are obscure, and various hypotheses as to its beginnings are advanced. One explanation is that it may have originated in medieval times when the mode of trial was known as "compurgation" or trial by wager of law. Under that method of trial, a party, instead of calling as his witnesses persons knowledgeable of the events pertinent to the litigation, customarily would call only his friends and relatives. They were known as "oath-helpers," and the issues were determined upon their "oaths." Naturally, they were partisans, and it was expected *103 that those called would testify in behalf of the party calling them, and that they would swear that he spoke the truth. Professor Wigmore says that "So long as such a notion persisted, it was inconceivable that a party should gainsay his own witness; he had been told to bring a certain number of persons to swear for him; if one or more did not do so, that was merely his loss; he should have chosen better ones for his purpose. This notion that a party must stand or fall by what his partisan affirms was long in disappearing." 3 Wigmore, Evidence (3d ed.) § 896, p. 383.
It has also been suggested that the source of the rule may lie in the gradual transition from the inquisitorial to the modern-day adversary system of trial. When trial by inquest was the mode, the practice was to select the jurors, or recognitors, as they were called, from among those who were acquainted with the case, and they resolved the issues upon their own knowledge of its facts. Along with the change from the old to the present day system came the opportunity to call as witnesses those who could testify to what they had observed. That opportunity originally was a privilege, rather than a right, and it was anticipated that a party exercising the privilege would be bound by what his witness said and would not wish to challenge him as being unworthy of belief. Ladd, "Impeachment Of One's Own Witness New Developments." 4 U. Chi. L. Rev. 69.
Whatever may have been its origin, the acceptance of the principle forbidding the impeachment of one's witness was by the end of the 1700's "notorious and unquestioned." Wigmore, supra, at 385. It was first stated, although not without qualification, by this court in Hildreth v. Aldrich, 15 R.I. 163, 1 A. 249 (1885). Two exceptions to a strict insistence upon the letter of the rule were recognized. The first was that the rule would not apply where the witness was one whom the law obliged a party to call;[2] and the second was that a party who was disappointed in the testimony of his witness might be allowed
"* * * to ask him if he has not made contradictory statements, for the purpose of refreshing the witness's recollection. * * * We know of no case which holds that, if the witness's recollection is not thus refreshed, the contradictory statements may be put in evidence by other witnesses. It is very clear that, if the only purpose is to refresh the witness's recollection, the purpose can be served as well by questions in regard to the statements as by proof of them * * *." Hildreth v. Aldrich, supra, at 164, 1 A. at 250.
The traditional rule laid down in Hildreth controlled until the court in Barker v. Rhode Island Co., 35 R.I. 406, 87 A. 174 (1913), relaxed it by holding that a trial justice in the exercise of sound judicial discretion might, if satisfied that a party had been surprised by the adverse testimony of his own witness, allow such portion of the testimony, taken at a previous trial as differed from present testimony, to be read to the witness. In addition to relaxing the Hildreth rule, the decision in Barker also casts doubt upon the rationale of the earlier case by suggesting perhaps the court there may have indulged "in a confusion of thought and of legal principle" when it advanced refreshing of recollection as the sole purpose for allowing evidence of this character.
Barker was followed in State v. Saccoccio, 50 R.I. 356, 147 A. 878, and then expanded in Souza v. United Electric Rys., 51 R.I. 124, 152 A. 419, where we suggested to *104 trial justices that they should "* * * grant some latitude to counsel who is surprised by his witness's answer, especially when counsel has the transcript of the witness's testimony at a former trial." Later in Manocchio v. Pettine, 84 R.I. 167, 122 A.2d 152, we again enlarged the area of admissibility and said that a trial justice might exercise his discretion in favor of the admission of a prior inconsistent statement "where the circumstances seem to require it in the interest of justice * * *."
Two other facets of the rule deserve mention. The first has to do with the effect of the prior inconsistent statement. Although there are eminent scholars[3] who believe that the earlier statement being closer to the events is superior in trustworthiness and should therefore have substantive value and be considered as proof of the facts which appear therein, under our rule its effect is limited to neutralizing the pretrial statement and to impeaching the credibility of the witness. Yellow Cab Co. v. Public Utility Hearing Bd., 99 R.I. 644, 210 A.2d 128; State v. Brown, 96 R.I. 236, 190 A.2d 725; Guglietti v. United Electric Rys., R.I., 137 A. 698.
Correlative to this limited effect concept is the obligation incumbent upon the trial justice to caution the jury on the effect they are permitted to give to the inconsistent statements. We approved the giving of such an instruction in State v. Brown, supra, and the authorities generally require a clear and direct admonition to be given either at the time of the admission of the statement or in the charge to the jury, or on both occasions. State v. Gallicchio, 44 N.J. 540, 210 A.2d 409; People v. Tate, 30 Ill.2d 400, 197 N.E.2d 26. So basic is this requirement that a failure to comply constitutes fatal error in jurisdictions where, unlike ours, plain error affecting substantial rights may be considered on review even though not raised at trial. Upham v. United States, 328 F.2d 661.[4]
The second facet deals with the Barker requirement which ties admissibility to surprise and permits the admission of prior inconsistent statements under this exception only if the trial justice finds that the counsel is surprised, that is that he had no prior knowledge that the witness would testify contrary to his earlier statement. Such a determination is a precondition to admission, and any hearing preceding the finding should be held in the absence of the jury. State v. Robertson, 102 R.I. 623, 232 A.2d 781; State v. Gallicchio, supra.
Our review of the decisions makes clear that our rule, which, of course, presupposes a proper foundation, allows a party to introduce evidence of his own witness's prior inconsistent statements for the announced limited purpose of neutralizing the adverse trial testimony and of impeaching the credibility of the witness if the trial justice in the exercise of a sound judicial discretion is satisfied that counsel has been surprised or if in his judgment the circumstances seem to require it in the interests of justice.
Clearly, in arriving at this rule we have whittled away much of the earlier prohibition against admissibility; and perhaps in allowing such evidence, whenever the interests of justice seem to require it, we may have yielded to the concept that the prohibition has no place in a system which *105 is dedicated to the ascertainment of truth and the achievement of justice.[5] Whether we have as yet acquiesced or whether we should are questions, however, which under the facts of this case need not be answered.
We now apply our rule to the facts of this case. The witness's prior inconsistent statements, if admissible at all, could have come in only because the circumstances could fairly and reasonably be deemed to require it in the interests of justice. The surprise exception was not available inasmuch as there had been no finding that the prosecutor was surprised by the witness's adverse testimony.
The setting in which the question of admissibility came before the trial justice was that the witness on the stand, a companion of defendant at or about the time of the commission of the crime, had categorically denied knowing any facts which might implicate defendant in the killing and had additionally testified that a statement prepared by the police and signed by him within a few hours after the killing had in no way refreshed his recollection of the events of the morning of the 24th. That same witness, in the early stages of his testimony, unsuccessfully attempted to avoid testifying at all by invoking his constitutional privilege. In those circumstances, can it be said that the trial justice abused his discretion in concluding that the interests of justice required him to allow the jury to be informed of whatever impeaching matter might be contained in the police report? We think not.
Those of the defendant's exceptions which he has briefed and argued are overruled, those neither briefed nor argued are deemed to have been waived, and the case is remitted to the superior court for further proceedings.
KELLEHER, J., not participating.
NOTES
[1] A strict compliance with the procedural requirements may be excused where insistence would deprive a defendant of his constitutional protections. Concurring opinion of Joslin, J., in State v. Dufour, 99 R.I. 120, 206 A.2d 82. 88; State v. Mendes, 99 R.I. 606, 210 A.2d 50, 56.
[2] This exception was followed in Newell v. White, 29 R.I. 343, 73 A. 798, where a party was allowed to impeach a subscribing witness to a will for the reason that the witness was not one of his own selection, but one who by law had to be called.
[3] McCormick, Evidence (1954) chap. 5, § 39, pp. 73-82; Morgan, "Hearsay Dangers And The Application Of The Hearsay Concept," 62 Harv. L. Rev. 177, pp. 192-196. Professor Wigmore while not subscribing to view that the earlier statement has superior credibility nonetheless takes the position that it has "affirmative testimonial value." 3 Wigmore, supra, § 1018, p. 687.
[4] Rule 52(b) of the federal rules of criminal procedure permits a reviewing court to notice plain errors affecting substantial rights even though not raised at trial.
[5] This position is supported in Ladd, "Impeachment Of One's Own Witness New Developments," 4 U. Chi. L. Rev. 69, 96; Schatz, "Impeachment Of One's Own Witness: Present New York Law And Proposed Changes," Cornell L.Q. 377, 394 (1942); Note, "Impeaching One's Own Witness," 49 Va. L. Rev. 996 (1963).
In addition the common law rule has been abolished by legislative action and in suggested model evidentiary rules. 2 Wyoming Statutes (1957) § 1-143; Model Code of Evidence rule 106 (1) 1942; Uniform Rules of Evidence rule 20. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3016946/ | ___________
No. 95-3570
___________
James McAlphin, *
*
Appellant, *
*
v. * Appeal from the United States
* District Court for the
S. Rogers, L.P.N.; Nurse Parker; * Eastern District of Arkansas.
Dr. Thomas, Delta Regional Unit; * [UNPUBLISHED]
PHP Healthcare Corporation, *
*
Appellees. *
___________
Submitted: June 5, 1996
Filed: June 11, 1996
___________
Before FAGG, BOWMAN, and HANSEN, Circuit Judges.
___________
PER CURIAM.
James McAlphin appeals from the district court's1 order dismissing
his 42 U.S.C. § 1983 action. Having carefully reviewed the parties' briefs
and the record (including the hearing transcript), we conclude the district
court correctly determined that McAlphin failed to establish that
defendants were deliberately indifferent to his serious medical needs in
violation of the Eighth Amendment. Accordingly, we affirm the judgment of
the district court. See 8th Cir. R. 47B.
1
The Honorable George Howard, Jr., United States District
Judge for the Eastern District of Arkansas, adopting the report and
recommendation of the Honorable H. David Young, United States
Magistrate for the Eastern District of Arkansas.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
-2- | 01-03-2023 | 10-13-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1544087/ | 567 A.2d 1271 (1989)
NEW CASTLE COUNTY COUNCIL, Defendant Below, Appellant,
v.
BC DEVELOPMENT ASSOCIATES, Plaintiff Below, Appellee.
Supreme Court of Delaware.
Submitted: September 26, 1989.
Decided: December 13, 1989.
Michael Mitchell (argued), New Castle County Law Dept., Wilmington, for appellant.
Edward M. McNally (argued) and Barbara MacDonald, Morris, James, Hitchens & Williams, Wilmington, for appellee.
Before HORSEY, WALSH and HOLLAND, JJ.
*1272 WALSH, Justice:
New Castle County Council ("Council") appeals from a decision of the Court of Chancery granting partial summary judgment in an action challenging Council's denial of a rezoning application made by appellee, BC Development Associates ("BCD"). The Court of Chancery held that Council's denial was arbitrary and capricious because Council failed to articulate the rationale underlying its decision, as required by Tate v. Miles, Del.Supr., 503 A.2d 187 (1986). In its appeal, Council raises four challenges to the Court of Chancery's decision. First, Council argues that the record created in connection with BCD's application provides adequate support for its actions and thus obviates the need for a more direct statement of the Council's reasoning. Second, Council alleges that BCD's proposed rezoning was manifestly contrary to the Comprehensive Development Plan adopted by New Castle County pursuant to 9 Del.C. § 1344. Council argues that this fact alone is sufficient to justify its actions. Third, Council contends that even if the Court of Chancery correctly determined that the decision must be set aside, the Court erred in remanding the case directly to Council. Rather, it is argued, Tate v. Miles requires that the entire zoning process be repeated. Finally, Council alleges that the Court of Chancery abused its discretion by dismissing without prejudice certain constitutional claims made by BCD.
Having reviewed the record created by Council during its consideration of BCD's application, we find that it provides an inadequate explanation of the reasoning underlying Council's actions. Without such an explanation, we cannot determine whether Council has acted in accordance *1273 with requirements imposed by the General Assembly. Thus, we find that Council's decision must be invalidated. However, we believe that the zoning process should be reinitiated, lest the Council base its decision upon information and analysis that have become stale through the passage of time. Accordingly, we affirm the Court of Chancery's decision in all respects except for the remedy. The earlier proceedings must be vacated and new proceedings begun.
I
The property that is the subject of BCD's rezoning application (the "subject property" or the "property") consists of approximately thirty-one acres of largely undeveloped land, located near the intersection of the Concord Pike and Silverside Road. The subject property, originally owned by the Brandywine Country Club, was sold to Louis Capano and Sons, Inc. pursuant to an agreement of sale dated November 21, 1984. The buyer's rights under the agreement were then assigned to BCD, an affiliate of the buyer.
Although the subject property was zoned for residential use at the time of sale, it is located along a stretch of highway that has undergone extensive commercial development in recent years. BCD intended to develop a shopping facility on the subject property. Accordingly, it introduced before the Council an ordinance that would rezone the property and amend the New Castle County Comprehensive Development Plan (the "Comprehensive Development Plan" or the "Plan") to reflect the new use. Pursuant to 9 Del.C. § 1153(a), the proposed ordinance was referred to the Department of Planning (the "Department") and the Planning Board (the "Board") of New Castle County for their study. The Department and the Board conducted an extensive analysis of BCD's planned development. They considered the overall compatibility of the project with its surroundings, as well as its impact on traffic flow, storm water drainage, and sewer facilities. The Department and the Board held a public hearing on December 15, 1985. Several months later, on October 21, 1986, the Department and the Board issued a recommendation that Council approve BCD's proposed ordinance. They found that the subject property was unsuitable for residential development and that BCD's proposal would fit in well with the property's surroundings. However, the recommendation was conditioned upon BCD's agreement to aid in the completion of planned highway improvements.
Council scheduled a public hearing on September 22, 1987 to allow consideration of the proposed ordinance. Because this hearing is the centerpiece of the record upon which Council relies to justify its decision, some explanation of what occurred at the hearing is appropriate. The hearing began with a presentation by BCD's attorney. He focused his discussion upon the various concerns raised by the Department and the Board in their consideration of the ordinance, attempting to show that BCD had designed its proposal to meet each of these concerns. Several members of Council questioned BCD's attorney regarding the assumptions upon which BCD's study of traffic flow was based. Particular attention was focused on the effect that the completion of a highway known as the "Blue Route" would have upon traffic flow along the Concord Pike.[1]
The floor was then opened to public comment. A representative of the Brandywine Country Club and a local businessman spoke in favor of the rezoning. An attorney for Widener University then spoke in opposition.[2] He questioned the desirability of further construction in an already heavily *1274 developed area. He also suggested that the rezoning would impair the quality of life at the University and in the surrounding area. In particular, he voiced a fear that consumption of alcoholic beverages at a restaurant planned for BCD's shopping facility would threaten the safety of students. Several members of Council questioned Widener's attorney concerning the University's efforts to purchase the subject property both before and after its acquisition by BCD. He suggested that the subject property would provide an excellent location for either University buildings or a conference center or community center of some sort.
The Vice President of the Council of Civic Organizations of Brandywine Hundred (the "CCOBH") then addressed the Council and challenged the advisability of further commercial development in the area. He argued that the communities he represented would be better served if the subject property were sold to Widener University or developed as residential property. The CCOBH representative also argued that the rezoning was contrary to the Comprehensive Development Plan and that the Plan should not be modified on an ad hoc basis. The members of Council and the CCOBH representative then engaged in a discussion concerning the relationship between the proposed ordinance and past and future rezoning actions in the Concord Pike area.
Several local residents voiced their opposition to the ordinance. They included a local businessman who argued that a new shopping facility would pose a competitive threat to existing retailers. Council then closed the public debate portion of the meeting and Councilman Aiello introduced into the record a letter from "A Concerned Citizen." The letter alleged that the members of Council had taken bribes from the developer to win their approval for the rezoning.
Council proceeded to discuss the proposed ordinance among themselves and concluded with a vote. Councilmen LaPenta and Purzycki stated that they considered commercial development to be the best possible use of the subject property. Accordingly, they both voiced their support for the recommendation of the Department and the Board. Council President Peterson stated that she would oppose the rezoning, and that her "decision really hinged on the issue of traffic more than anything else." She then explained how she had contacted the Pennsylvania Department of Transportation ("PennDOT") to elicit its view of the effect of the "Blue Route" on Concord Pike traffic. She reported that the PennDOT employee with whom she spoke expected the impact of the new highway to be negligible. Thus, Council President Peterson challenged the value of the traffic study upon which BCD relied and cast her vote against the rezoning.
Councilman Cecil first stated that he was "in a bit of a dilemma" and would abstain because he could not accurately gauge the wishes of the residents in the district that he represented. Several minutes later, however, he cast his vote against the ordinance without comment. Councilman Ianni questioned representatives of BCD and the CCOBH concerning the traffic patterns that could be expected along the Concord Pike if the Blue Route siphoned off no traffic. Councilman Ianni then cast his vote against the ordinance without specifying the basis of his opposition. Finally, Councilmen Aiello and Roberts voted against the rezoning without comment. Thus, the final vote against the ordinance was five to two. Of those opposing the rezoning, only Council President Peterson explicitly stated the reason for her vote.
BCD filed its Chancery Court action on March 7, 1988. In a memorandum opinion, the Court of Chancery granted BCD's motion for summary judgment. BC Dev. Assocs. v. New Castle County Council, Del. Ch., C.A. No. 9714, Berger, V.C., 1988 WL 130634 (Dec. 6, 1988). The Vice Chancellor held that although the record provided some basis for Council's actions, a reviewing court must not be left to speculate on the rationale underlying a given zoning action. Rather, unless Council's reasoning is patently obvious from the record, the members of Council must articulate the basis for their votes.
*1275 II
When Council considers a zoning ordinance, it is acting in a legislative capacity. Nevertheless, the legislative power that reposes in the Council is not inherent; rather, it has been delegated to Council by the General Assembly. 9 Del.C. § 2601. Thus, in the realm of rezoning, the power of Council is analogous to that of an administrative agency, since the fundamental power to regulate land use rests with the General Assembly. Del. Const. art. II, § 25; Hayward v. Gaston, Del.Supr., 542 A.2d 760, 766 (1988). It is true that the delegation of the General Assembly's authority to the counties of Delaware is broadly cast. Under 9 Del.C. § 2601, Council
may, in accordance with the conditions and procedure specified in this subchapter, regulate the location, height, bulk and size of buildings and other structures, the percentage of lot which may be occupied, the size of yards, courts and other open spaces, the density and distribution of population, the location and uses of buildings and structures for trade, industry, residence, recreation, public activities or other purposes and the uses of land for trade, industry, residence, recreation, public activities, water supply conservation, soil conservation or other similar purposes, in any portion or portions of New Castle County which lie outside of incorporated municipalities....
However, it is axiomatic that delegated power may be exercised only in accordance with the terms of its delegation. See Del. Const. art. II, § 25; Green v. County Planning & Zoning Comm'n of Sussex County, Del.Ch., 340 A.2d 852, 856-57 (1974), aff'd sub nom. Sea Colony, Inc. v. Green, Del.Supr., 344 A.2d 386 (1975); Kreshtool v. Delmarva Power & Light Co., Del.Super., 310 A.2d 649, 654 (1973); Mitchell v. Delaware Alcoholic Beverage Control Comm'n, Del.Super., 193 A.2d 294, 310-311 (1963), rev'd on other grounds, Del.Supr., 196 A.2d 410 (1963). See also Lyng v. Payne, 476 U.S. 926, 937, 106 S. Ct. 2333, 2340, 90 L. Ed. 2d 921 (1986); Morgan v. United States, 298 U.S. 468, 478-80, 56 S. Ct. 906, 910-11, 80 L. Ed. 1288 (1936); American School of Magnetic Healing v. McAnnulty, 187 U.S. 94, 107-110, 23 S. Ct. 33, 38-39, 47 L. Ed. 90 (1902) (cases discussing limits of delegated power in various contexts). The General Assembly has mandated that the regulations adopted by Council must "be in accordance with a comprehensive development plan adopted pursuant to [9 Del.C. ch. 13]" and must "be designated and adopted for the purpose of promoting the health, safety, morals, convenience, order, prosperity or welfare of the present and future inhabitants of [Delaware]." 9 Del.C. § 2603.[3] Zoning regulations that are not reasonably related to one of these enumerated purposes may be set aside as arbitrary and capricious. Willdel Realty, Inc. v. New Castle County, Del.Supr., 281 A.2d 612, 614 (1971).
These empowering statutes leave Council with a great deal of discretion to determine how best to promote the goals *1276 announced by the General Assembly. It must be stressed, however, that this broad latitude does not arise simply because the actions of Council are labelled "legislative." Council's authority arises by operation of statute, and to the extent that it is limited, the same statutes control. Thus, when the validity of a zoning regulation is judicially challenged the standard for review is whether the action is in compliance with applicable statutes. The correct interpretation of statutes is a question of law, and the review of this Court on legal questions is plenary. E.I. du Pont de Nemours & Co. v. Shell Oil Co., Del.Supr., 498 A.2d 1108, 1113 (1985). Of course, the broad terms of the relevant statutes insure that a reviewing court must frequently find that Council has acted within the realm of its authority. For this reason, the decisions of Council carry a presumption of validity and the burden of rebutting that presumption is placed upon the challenging party. McQuail v. Shell Oil Co., Del.Supr., 183 A.2d 572, 579 (1962). Nevertheless, rulings in which zoning regulations have been overturned for failure to meet statutory standards are hardly unprecedented. See, e.g., Green v. County Council of Sussex County, Del.Ch., 508 A.2d 882 (1986), aff'd, Del.Supr., 516 A.2d 480 (1986); Green v. County Planning & Zoning Comm'n of Sussex County, Del.Ch., 340 A.2d 852 (1974), aff'd sub nom. Sea Colony, Inc. v. Green, Del.Supr., 344 A.2d 386 (1975). Thus, the courts have a definite, albeit limited, role to play in the zoning process.
When Council makes a rezoning decision without establishing the basis for its action, it thwarts the ability of a court to provide effective review. As we stated in Tate v. Miles, Del.Supr., 503 A.2d 187, 191 (1986), "[u]nless Council creates a record or states on the record its reasons for a zoning change, a court is given no means by which it may review the Council's decision." Thus, when a court overturns an action taken by Council because of a failure to articulate reasons, it is not necessarily holding that the action was not in accordance with the law and therefore was arbitrary and capricious. Rather, it is holding that Council has not permitted the Court to perform its role in the review process, i.e., to form an opinion of the propriety of Council's action. Of course, when a zoning regulation is not supported by an adequate record the inference that Council has acted arbitrarily arises naturally. However, even where Council's actions appear reasonable, unless the underlying rationale is clear, the reviewing court cannot properly discharge its duty.
A.
Council's principal argument upon appeal is that the record, standing alone, provides an adequate basis for reviewing Council's compliance with statutory standards. Council stresses that Tate v. Miles gives Council two options: either it must "state[] on the record its reasons" or it must "create[] a record." Without question, Council has created a record. Therefore, Council argues that we should scour the record for evidence to support its actions and if some evidence to that effect is found, uphold the result.
We do not believe that such a literal reading of Tate v. Miles is warranted. It is true that Tate allows Council a measure of flexibility. Council need not draft a detailed statement of findings of fact and conclusions of law in order to explain a given zoning regulation. However, insofar as Council simply "creates a record" and relies upon that record to justify its decision, the record must prove to be an adequate substitute for a more formal explanation. Thus, Council's reasons must be clear from the record. If several possible explanations for a given decision appear on the record, the reviewing court must not be left to speculate as to which evidential basis Council favored.[4] We lay down no *1277 precise formula that Council must follow in order to satisfy the Tate requirements. Nevertheless, we believe that when Council is faced with a particularly complex zoning application and a large body of conflicting evidence is presented for its consideration, a formal statement of its findings would greatly aid the process of judicial review.
Our own examination of the record in this case leads us to concur in the Court of Chancery's finding that Council failed to satisfy the Tate standard. Of the five Council members who voted against the proposed ordinance, only Council President Peterson gave any direct explanation of her reasons for doing so. Arguably, the questions posed by Councilman Ianni just prior to his "no" vote demonstrate that he too was concerned about the impact of the rezoning upon traffic flow. However, there is no logical reason to impute the views of these two members to the entire Council in the absence of some articulation indicating agreement. Indeed, Councilman Cecil stated that he felt that BCD had adequately addressed the public's concern over traffic and appropriate land use. Moreover, the evidence and testimony presented during the course of the hearing is simply too extensive and contradictory to allow us to conclude that concern over traffic flow was the only possible explanation for Council's opposition to the rezoning. As the record reveals, various individuals expressed concern over storm water drainage, appropriate land use, and the effect of development upon neighboring Widener University, as well as traffic flow. Any of these concerns might arguably support Council's decision, but none of the members pointed to these matters as justification for their votes. As a result, the Court is left to guess whether these factors played any part in Council's decision.
The record also reveals that some discussion at the hearing focused on the competitive impact of new development upon existing businesses. While we have no occasion to consider whether limiting competition is an appropriate basis for denying a zoning application, the record does not dispel the impression that Council may have relied upon this as grounds for rejection of rezoning. In sum, the record presents a murky picture of the reasoning underlying Council's decision. As a result, it provides an inadequate basis for judicial review.
B.
Council argues that the proposed rezoning was contrary to the Comprehensive Development Plan and that this fact alone justified the ordinance's rejection. It is true that under 9 Del.C. § 2603(a), Council may decline to enact a proposed rezoning because it is in conflict with the Plan. Council is also vested with the power to amend the Plan to allow a rezoning that it determines is appropriate. 9 Del.C. § 1344(b). Thus, while the fact that an ordinance conflicts with the Plan supplies Council with a valid reason for rejecting the ordinance, it does not automatically dictate that result. If Council chooses to reject a rezoning proposal because of a conflict with the Plan, it should cite this conflict as the basis for its action. We see no reason to distinguish this particular reason for a rezoning ordinance's rejection from any of the other possible rationales that Council might adopt. The fact that the record provides evidence that a given theory could have supported Council's decision does not allow us to conclude confidently that Council actually relied upon that theory. Thus, we decline to create an exception to the general rule announced in Tate.
III
We turn now to the question of the appropriate remedy for Council's error. In Tate, we held that when a county's *1278 council fails to state reasons for a zoning decision, the council should not be permitted simply to supply a rationale upon remand. A remand limited to another vote by Council would allow "a dubious method of ad hoc after-the-fact legislation." Therefore, we held that "[t]he hearing process must ... begin anew." Tate, 503 A.2d at 192.
In this case, the Court of Chancery ordered that Council hold a new public hearing before reconsidering BCD's proposal. We believe, however, that the lapse of time between the original consideration of the rezoning and the conclusion of this appeal renders this remedy inadequate. It has been over three years since the Board and the Department issued their recommendation that the ordinance be adopted. During that time, much of the information upon which the parties relied has doubtless become outdated. In particular, traffic patterns along the Concord Pike may have developed in a manner that would either vindicate or discredit BCD's projections. Just as this Court must be given an adequate explanation of Council's reasoning in order to reach a meaningful decision, so also Council must have up-to-date information in order to evaluate the proposed zoning effectively.
Nor is it necessary to draw a bright line to establish when the entire rezoning process must be repeated. If a court can confidently conclude that the information available to Council is not outdated, then a new public hearing followed by a new vote and an adequate explanation of Council's decision may provide a sufficient remedy. In a case such as this one, however, where there is reason to believe that repeating the process could provide Council with more current information, a simple rehearing must be considered inadequate.[5]
IV
Finally, Council argues that the Court of Chancery erred in dismissing without prejudice certain claims raised by BCD under the Delaware and United States Constitutions. Council alleges that because the claims were fully briefed, they should have been resolved, so as to allow a complete adjudication. However, it is well-established in Delaware that "a constitutional question will not be decided unless its determination is essential to the disposition of the case." Downs v. Jacobs, Del. Supr., 272 A.2d 706, 708 (1970). The Court of Chancery did not abuse its discretion in determining that BCD's constitutional claims were not essential to the resolution of the case.
In conclusion, we AFFIRM the Court of Chancery's ruling that Council's decision must be invalidated. Council failed to provide an adequate explanation of its reasoning process, thereby thwarting judicial review of its decision. We hold that unless the reason for Council's action is unequivocally obvious from the record, Council must provide some clear statement of its rationale. We also hold that the mere fact of a conflict between a proposed rezoning and the Comprehensive Development Plan does not excuse Council's failure to explain its actions. Finally, we find no error in the Court of Chancery's dismissal with prejudice of BCD's constitutional claims. However, we hold that the rezoning process must be reinitiated to insure that Council will not base its decision upon outdated information. The judgment of the Court of *1279 Chancery is AFFIRMED in part and REVERSED in part.
NOTES
[1] The study found that intersections affected by the BCD development would operate at from 120% to 141% of capacity during peak hours, a level of use deemed acceptable by the Delaware Department of Transportation. Several Council members questioned the study's assumption that 15% of the traffic currently travelling the Concord Pike would be siphoned off when Pennsylvania completed the Blue Route in 1995. The author of the BCD study opined that even if completion of the Blue Route had no effect on the Concord Pike, the affected intersections would still operate at the levels predicted by the study.
[2] Widener's Delaware Campus is adjacent to the northern boundary of the subject property.
[3] In determining whether a given regulation serves this purpose, Council must seek to promote:
amongst other things, the lessening of congestion in the streets or roads or reducing the waste of excessive amounts of roads, securing safety from fire and other dangers, providing adequate light and air, preventing on the one hand excessive concentration of population and on the other hand excessive and wasteful scattering of population or settlement, promoting such distribution of population and such classification of land uses and distribution of land development and utilization as will tend to facilitate and provide adequate provisions for public requirements, transportation, water flowage, water supply, drainage, sanitation, educational opportunities, recreation, soil fertility, food supply, protection of the tax base, securing economy in governmental expenditures, fostering the State's agricultural and other industries and the protection of both urban and nonurban development.
9 Del.C. § 2603(a).
In addition, 9 Del.C. § 2603(b) requires that: [t]he regulations shall be made with reasonable consideration, among other things, of the character of the particular district involved, its peculiar suitability for particular uses, the conservation of property values and natural resources and the general and appropriate trend and character of land, building and population development.
[4] Relying upon Searles v. Darling, Del.Supr., 83 A.2d 96 (1951) and Application of Beattie, Del. Super., 180 A.2d 741 (1962), Council alleges that the courts of the State have traditionally applied a less searching standard of review to the decisions of the Board of Adjustment. Council argues that it would be anomalous to require a "legislative" body to state the reasons for its decisions while not imposing the same requirement upon a mere "administrative" body such as the Board of Adjustment. However, the cases upon which Council relies draw a clear distinction between the factual findings of the Board of Adjustment and the questions of law presented to a court for review. While findings of fact are presumed valid if supported by "substantial evidence," questions of law are subject to plenary review. Application of Beattie, 180 A.2d at 744. If a decision of the Board of Adjustment did not contain enough information to permit a meaningful review of legal questions presented, there is no reason why a court could not apply a Tate-like analysis in order to set aside the decision.
[5] BCD argues that this remedy places the burden of Council's error upon BCD, since it must again incur the delay and expense that a rezoning application entails. We do not believe that the cost imposed upon BCD is an appropriate consideration. Although BCD seeks to advance its own interests by prosecuting this appeal, our decision must reflect a concern for the goals that the General Assembly sought to advance by delegating much of its authority to regulate land use. If we are to have confidence that Council is acting responsibly, it must be clear that it has acted within the scope of its authority. Similarly, it must be clear that it has relied upon timely information. Thus, the expense incurred by BCD is necessary to insure that the ultimate goal of preventing arbitrary and capricious decisions is advanced. We note also that BCD is not alone in bearing the costs of its zoning application, and that the costs incurred by Council should encourage it to provide adequate explanations for its actions in the future. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544149/ | 99 F.2d 349 (1938)
JOHN P. AGNEW & CO., Inc., et al.
v.
HOAGE, Deputy Com'r, U. S. Employees' Compensation Commission.
No. 6965.
United States Court of Appeals for the District of Columbia.
Decided June 30, 1938.
*350 Ringgold Hart, of Washington, D. C., for appellants.
David A. Pine, U. S. Atty., and Allen J. Krouse, Asst. U. S. Atty., both of Washington, D. C., for appellee.
Before GRONER, Chief Justice, and STEPHENS, MILLER, and EDGERTON, Associate Justices.
STEPHENS, Associate Justice.
This is an appeal from an order of the District Court of the United States for the District of Columbia granting a motion by the appellee to dismiss a bill in equity filed by the appellants.
The allegations in the bill were, in substance and effect, that: The appellants are coal dealers doing business in the District of Columbia; the appellee is Deputy Commissioner of the United States Employees' Compensation Commission for the District of Columbia. The appellee "In the administration of his office" rendered an "opinion" regarding "coal hustlers" as follows:
"Coal Hustlers
"A coal `hustler' is understood to be a person employed to carry coal, unloaded by the coal dealer, to the consumer's coal bin. The source of his engagement and payment of compensation usually will determine his status as an employee. If employed and paid by the consumer (although the latter may ask the coal dealer to select and send the man) he is engaged in employment that is casual as to the consumer and not in the usual course of business of the latter, and is not an employee under the District of Columbia Workmen's Compensation Act. If employed and paid by the coal dealer by whom he is engaged he is covered by the Act as an `employee' although the dealer may charge the cost to the consumer."
"Coal hustlers" are not employed by appellants but by appellants' customers, and in the dealings between the "hustlers" and the appellants, the latter act only as the agents of the customers. The opinion of the appellee, so far as it states that "If employed and paid by the coal dealer by whom he [a coal hustler] is engaged he is covered by the Act as an `employee' although the dealer may charge the cost to the consumer," is erroneous and is causing great pecuniary loss to the appellants since they "are required to carry compensation insurance upon said hustlers."
Upon these allegations the bill prays for a declaratory judgment "that a coal hustler, being a person employed to carry coal, unloaded by the coal dealer, to the consumer's bin, is not such an employee of said coal dealer as is required to be covered and protected by the insurance necessary to be carried by employers under the provisions of the District of Columbia Workmen's Compensation Act, [D.C.Code (1929) tit. 19, §§ 11, 12, 33 U.S.C.A. § 901, note; 33 U.S.C.A. § 901 et seq.,] although the dealer, at the request of his customer, obtains for such customer the services of a coal hustler, and, at the request of such customer, advances for such customer, and charges to his account, the sum earned by the coal hustler in carrying coal, delivered by the dealer, to the bin of the customer."
The motion to dismiss, summarized, embodied two grounds: (1) that the bill reveals no "actual controversy" between the parties as required by the Federal Declaratory Judgment Act; (2) that the only jurisdiction that the trial court has in compensation matters is over compensation orders where the deputy commissioner either grants or denies compensation in a particular case to an allegedly injured employee, and the instant case does not involve such an order. In sustaining the motion to dismiss the trial court ruled in favor of the appellee on both of these grounds. It will be necessary, however, to discuss only the first in this opinion, and we make no ruling upon the second.
We think the trial court correctly granted the motion to dismiss. The Declaratory Judgment Act, 48 Stat. 955, as amended, 49 Stat. 1027, 28 U.S.C. § 400 *351 (1934), 28 U.S.C.A. § 400, provides, so far as here material:
"In cases of actual controversy . . . the courts of the United States shall have power upon petition, declaration, complaint, or other appropriate pleadings to declare rights and other legal relations of any interested party petitioning for such declaration, whether or not further relief is or could be prayed, and such declaration shall have the force and effect of a final judgment or decree and be reviewable as such."
The Act "does not attempt to change the essential requisites for the exercise of judicial power. By its terms, it applies to `cases of actual controversy,' a phrase which must be taken to connote a controversy of a justiciable nature, thus excluding an advisory decree upon a hypothetical state of facts." Ashwander v. Tennessee Valley Authority, 297 U.S. 288, 325, 56 S. Ct. 466, 473, 80 L. Ed. 688, 1936.
The bill of complaint in the instant case sets forth no "actual controversy" within the meaning of the Federal decisions defining that phrase. It sets forth at best a difference of opinion between the appellants and the appellee. It is not alleged that the appellee has taken, or that he intends to take, action harmful to the appellants. While it is alleged generally that the appellants are by reason of the opinion "required to carry compensation insurance," it is not asserted that the appellee is imposing or threatening to impose this requirement, nor is it made to appear that under the Employees' Compensation Act he has authority so to do. There is furthermore no allegation that the appellee has made any claim that his opinion is being disregarded by any of the appellants or that the appellants have ever been in violation of the law as set forth in the opinion even before its issuance. In United States v. West Virginia, 295 U.S. 463, 55 S. Ct. 789, 79 L. Ed. 1546, 1935, the United States, in its bill of complaint, alleged that the New and Kanawha rivers running through West Virginia were one continuous interstate stream constituting navigable waters of the United States, that the United States had built dams on the Kanawha River for the purpose of improving navigation and was engaged in construction work on additional dams thereon and had in contemplation construction of a reservoir on the New River for the purpose of flood control, production of power, and in aid of navigation; that the corporate defendants, to wit, certain power companies, with the permission of the State of West Virginia, were building a dam upon the New and Kanawha rivers at Hawks Nest which would obstruct navigation and that they were doing so without the consent of the appropriate Federal authorities; that the State of West Virginia challenged the claim of the United States that the rivers were navigable and asserted that it had a right superior to that of the United States to license the use of the rivers for the production and sale of hydro-electric power and denied the right of the United States to require a license for the construction and operation of the power company dam. Sustaining motions to dismiss the bill, the Supreme Court said:
"But the bill alleges no act or threat of interference by the State with the navigable capacity of the rivers, or with the exercise of the authority claimed by the United States. . . . It alleges only that the State has assented to the construction of the dam by its formal permit, under which the corporate defendants are acting. There is no allegation that the State is participating or aiding in any way in the construction of the dam or in any interference with navigation . . .; or, indeed, that the State proposes to grant other licenses, or to take any other action in the future.
* * *
". . . there is presented here, as respects the State, no case of an actual or threatened interference with the authority of the United States. At most, the bill states a difference of opinion between the officials of the two governments, whether the rivers are navigable and, consequently, whether there is power and authority in the federal government to control their navigation, and particularly to prevent or control the construction of the Hawks Nest dam. . . . There is no support for the contention that the judicial power extends to the adjudication of such differences of opinion. Only when they become the subject of controversy in the constitutional sense are they susceptible of judicial determination. See Nashville, C. & St. L. Ry. Co. v. Wallace, 288 U.S. 249, 259 [53 S. Ct. 345, 77 L. Ed. 730, 87 A.L.R. 1191]. Until the right asserted is threatened with invasion by acts of the State . . . there is no question presented which is justiciable by a federal court. . . ." [Italics supplied] [295 U.S. at pages 472, 473, 474, 55 S.Ct. at pages 792, 793.]
*352 See also Liberty Warehouse Co. v. Grannis, 273 U.S. 70, 47 S. Ct. 282, 71 L. Ed. 541, 1927; Willing v. Chicago Auditorium Ass'n, 277 U.S. 274, 48 S. Ct. 507, 72 L. Ed. 880, 1928.
Moreover, since all that the appellee has done, as alleged, is to render the "opinion" above set forth, there are not involved under the allegations of the bill sufficiently concrete issues for determination. The suggested "controversy" has not become sufficiently ripe and clarified to be the subject of a declaratory judgment. The appellants are apparently concerned over the asserted ruling in the last sentence of the opinion that "If employed and paid by the coal dealer by whom he [a coal hustler] is engaged he is covered by the Act as an `employee' although the dealer may charge the cost to the consumer." And the appellants would have the court determine that this statement is erroneous. The statement itself is made upon a contingency, that is to say, it purports to rule that if a hustler is employed and paid by the coal dealer by whom he is engaged he is an employee covered by the Compensation Act notwithstanding that the dealer may charge the cost to the consumer. What determines whether a hustler is "employed" by the dealer is not stated in the "opinion." The most that is said is that "The source of his engagement and payment of compensation usually will determine his [a coal hustler's] status as an employee." (Italics supplied) If the appellants mean to ask the court to declare that no coal hustlers are the employees of coal dealers, that is too abstract a proposition for judicial determination. As was said in United States v. West Virginia, supra: "General allegations that the State challenges the claim of the United States that the rivers are navigable, and asserts a right superior to that of the United States to license their use for power production, raise an issue too vague and ill-defined to admit of judicial determination." (Italics supplied) 295 U.S. at page 474, 55 S.Ct. at page 793. If the appellants mean to ask a declaration that their particular coal hustlers are not their employees and need not be insured, no issue exists for such a ruling. The appellee's opinion does not say that the appellants' coal hustlers are their employees. In Ashwander v. Tennessee Valley Authority, supra, power company stockholders sought to set aside as invalid a contract between the company and the Authority, and they also asked a general declaratory decree with respect to the rights of the Authority in various relations. The Supreme Court said:
"We agree with the Circuit Court of Appeals that the question to be determined is limited to the validity of the contract of January 4, 1934. The pronouncements, policies and program of the Tennessee Valley Authority and its directors, their motives and desires, did not give rise to a justiciable controversy save as they had fruition in action of a definite and concrete character constituting an actual or threatened interference with the rights of the persons complaining. The judicial power does not extend to the determination of abstract questions. . . ." [297 U.S. at page 324, 56 S.Ct. at page 472.]
In Great Atlantic & Pacific Tea Co. v. Grosjean, 301 U.S. 412, 57 S. Ct. 772, 81 L. Ed. 1193, 112 A.L.R. 293, 1937, the Tea Company sought to enjoin the enforcement of the Louisiana chain store tax statute, which provided that "the tax `shall be based on the number of stores or mercantile establishments included under the same general management . . ., whether operated in this State or not . . ..'" Montgomery Ward & Company intervened, alleging that it had five stores in Louisiana, that it owned and operated also numerous mail order houses and order stations in other states which were engaged in interstate commerce, and that "the words `mercantile establishments' used in said Act apparently include the aforesaid mail order houses and order stations. . . . Said Act does not by its terms exclude from its operation said establishments engaged in interstate commerce, and, therefore, violates the Commerce Clause of the United States Constitution. . . ." 301 U.S. at page 428, 57 S. Ct. at page 778. The Supreme Court dismissed the intervenor's bill as premature and without equity, saying:
"The record discloses no rules or regulations promulgated by the appellee Supervisor of Public Accounts and no ruling by any responsible state official as to which of Montgomery Ward & Company's establishments are to be included in reckoning the total of its retail stores. For all that appears neither its mail order houses, nor its order stations, nor its department stores, will be included in the computation.
"It is manifest that Montgomery Ward & Company cannot upon mere supposition that the Act will be unconstitutionally construed and applied in respect of its five *353 stores in Louisiana obtain an advisory decree that the Act must not be so administered as to burden or regulate interstate commerce." [301 U.S. at pages 429, 430, 57 S. Ct. at page 779.]
Similarly, the appellants cannot upon mere supposition that the appellee's opinion will be erroneously and illegally applied to their coal hustlers obtain an advisory decree that it must not be so applied.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544179/ | 213 Md. 414 (1957)
132 A.2d 469
AGER
v.
BALTIMORE TRANSIT COMPANY ET AL.
[No. 161, October Term, 1956.]
Court of Appeals of Maryland.
Decided May 30, 1957.
The cause was argued before BRUNE, C.J., and COLLINS, HENDERSON, HAMMOND and PRESCOTT, JJ.
Amos I. Meyers and Robert S. Rody, for appellant.
J. Gilbert Prendergast, with whom were Edward O. Clarke, Jr., and Clark, Smith & Prendergast on the brief for appellees, Alan Fleischer and Rosa S., his wife.
Hamilton O'Dunne, with whom was Patrick A. O'Doherty on the brief for appellee, The Baltimore Transit Company.
PRESCOTT, J., delivered the opinion of the Court.
The appellant has appealed from a judgment on a verdict in favor of the appellees in the Superior Court of Baltimore City. The case below was a personal injury one, brought by the appellant, Virginia Ager, against the Baltimore Transit Company, Alan Fleischer and his wife, Rosa S. Fleischer. At the conclusion of the trial, the jury rendered a verdict in favor of the defendants, and from a judgment made absolute on the verdict, this appeal has been taken.
On May 11, 1954, about 3:30 in the afternoon, at the intersection of Liberty Heights Avenue and Cedardale Road, there was a collision between an eastbound streetcar of the Baltimore *418 Transit Company and an automobile driven by Rosa Fleischer. This automobile prior to the accident had been eastbound, but at the time of the collision it was in the act of attempting to make a lefthand turn to go north on Cedardale Road across the path of the oncoming streetcar. The track at the area in question is T-rail construction, except that at the street intersection of Cedardale Road, there is paving to allow traffic to cross the tracks, which otherwise would be impassable.
The plaintiff, who was employed as a domestic, maintains that she was seated as a passenger on the street-car, and, at the time of the collision, was bending over to recover a magazine that had slipped to the floor. She testified that she heard "this awful noise" and "fell" to the floor, striking her breast on the side of the car. She further testified that she felt pains in her body, but alighted from the car at the motor-man's request and boarded a following street-car; that upon being advised to give her name to the operator of the first street-car, she got off the second car to do so, but was prevented from doing so by a policeman; and that she experienced a "real sharp" pain in her back and neck, and fainted. At least one of the appellees disputes the fact that the appellant was in fact a passenger on the street-car at the time of the accident, and both contend that she sustained no injury, even if she were such a passenger. This gives a brief outline of the facts. Others will be added as they seem pertinent in dealing with the numerous contentions of the appellant. As she has abandoned the first of these, we shall begin with the second and follow in accordance with her numbering.
II
At the trial below, after the taking of testimony and the court had delivered its charge, the jury retired to deliberate upon the issues in the case. After deliberating for some time, the jury returned to the jury-box and informed the judge that the members were unable to agree upon a verdict. Whereupon, the judge said, "Well, then, it is incumbent upon me, and I do discharge you from further consideration of the case." Immediately thereafter before any juror had left the *419 jury-box, the clerk of the court, evidently having seen or heard some indication from the jury, stated: "They have changed their minds now." The court then directed the jury to return to their chamber and deliberate further, which they did and, thereafter, returned a verdict in favor of the defendants. The appellant contends that as soon as the trial court made the above statement, the jury was rendered functus officio and was without further power or capacity to consider the case.
This Court at an early date, 1827, held that a verdict may be varied from by the jury, at any time before the verdict is recorded. Edelen v. Thompson, 2 Harris & G. 31, 34. Cf. Bronstein v. Amer. Ice Co., 119 Md. 132, 138, 86 A. 131. But, ordinarily a jury should not be permitted to amend its verdict after it has been recorded and the jury dismissed. Harris v. Hipsley, 122 Md. 418, 89 A. 852; Gaither v. Wilmer, 71 Md. 361, 18 A. 590; Williams v. New York, etc., 153 Md. 102, 107, 137 A. 506. Of course, in this case there was no verdict at the time the jury was directed to resume deliberation, and the proposed discharge of the jury was never recorded. It was held in the case of Koontz v. Hammond, 62 Pa. 177, that, although the jury had been ordered discharged, they could still render a verdict as they had not separated or left the court room and their discharge had not been recorded. We think this was a proper ruling. It would seem a vain and futile holding to require the parties to undergo another lengthy trial, with its consequent expense and consumption of time, under the circumstances stated above. Cf. 66 A.L.R. 542. We find no error in the trial Court's decision to have the jury consider the case further.
III
Gordon L. Remlein, a member of the Baltimore City Fire Department, was produced as a witness for the transit company. His duties for about five years involved serving as an attendant on ambulances operated by the Department. He had completed, as a part of his preliminary training, a course in first-aid to injured persons and presumably had been assisting such people at the scenes of accidents for five years. He arrived at the scene of the collision, and found the appellant *420 lying on the ground as though she had fainted. He testified that when he looked at appellant, he touched her eyes whereupon she started to "squint". Over objection, he said that that indicated to him that she was feigning. He explained further that when he attempted to raise her eyelid she "squinted" again and he could not open her lids at all. This indicated to him that she was resisting his attempts to open her eyes as an incident of his examination, although she appeared to be in a faint. He stated, also, that upon being revived, she walked to the ambulance without complaining of any injuries and later walked from the ambulance inside Provident Hospital.
The appellant argues that this permitted a lay witness, who did not possess the necessary professional qualifications, to render an opinion on a medical question. In the view we take of the matter, it will be unnecessary to consider generally the required qualifications of medical experts, who are persons possessing technical and peculiar knowledge in relation to matters with which the mass of mankind are supposed not to be acquainted. We do not feel that it required the professional skill of a medical doctor to qualify a witness to testify that one, who is supposed to be in a faint and "squints" her eye when the eyelid is raised, is possibly feigning or resisting an attempt to open her eye. If this be not a matter of general knowledge, it certainly must be known by every ambulance attendant of five years experience, who has taken a course in first-aid to injured persons. There was no error here.
IV
The appellant argues next that, as Dr. Mostwill, a witness called by one of the appellees, on cross-examination stated that in his one examination of the appellant the presence of a disc injury could not be "ruled out", this was sufficient to submit to the jury the issue of whether the appellant did in fact have a disc condition. The submission of such a question necessarily involved also the question of whether such disc condition, if it were found, was caused by the alleged torts of the appellees, a subject upon which no evidence was offered. It is clear from the evidence that the discovery of a disc injury *421 is not an exact science, and it is unlike the discovery of fractures which usually are easily detected by X-Ray photographs. Thus, it is obvious that there is no basic difference between expressing a disc condition in terms of the "possibility" of its existence, and stating that its "presence" could not be ruled out. Unfortunately, it is the lot of all mortals to have it said of them after a physical examination that the presence of various maladies and imperfections "cannot be ruled out". However, to submit to the jury on the basis of such testimony, the question of whether such things actually exist and if they do, were they caused by the appellees' alleged torts would be an open invitation to substitute conjecture and speculation for testimony which can form a reasonable basis for a conclusion. In matters of proof, neither the courts nor juries are justified in inferring from mere possibilities the existence of facts, and they cannot make mere conjecture or speculation the foundation of their verdicts.
Maryland cases, in accord with these well-recognized and established principles are all consistent in rejecting the proposition that the jury may form a judgment or conclusion on the basis of testimony which admits of mere possibilities and have stated in various cases that the test to be applied, whether the question involved is the existence of an injury or its cause, is reasonable probability or reasonable certainty. B. & O.R.R. Co. v. State, etc., 71 Md. 590, 18 A. 969; United Railways & Electric Co. v. Dean, 117 Md. 686, 84 A. 75; Abend v. Sieber, 161 Md. 645, 158 A. 63; Mount Royal Cab Co. v. Dolan, 166 Md. 581, 171 A. 854; Mangione v. Snead, 173 Md. 33, 195 A. 329; Langenfelder v. Jones, 178 Md. 421, 13 A.2d 623, 15 A.2d 422; Riley v. Naylor, 179 Md. 1, 16 A.2d 857; Finney v. Frevel, 183 Md. 355, 363, 37 A.2d 923; Brehm v. Lorenz, 206 Md. 500, 506, 112 A.2d 475.
The appellant cites the case of Langenfelder v. Thompson, 179 Md. 502, 20 A.2d 491. However, that case is clearly distinguishable from the immediate one. There, the basic question involved was the cause of the retroflexion and retroversion of the plaintiff's uterus. The appeal was taken because a gynecologist for the plaintiff had testified that in *422 his opinion "the accident in all probability" had caused this condition. A Dr. Galvin, called by the defendants, had also testified that "a rare accident" could produce a displacement of the uterus. Despite this, the defendants urged that this condition could not have been caused by trauma, and that the opinion given by the doctor invaded the province of the jury. It was on this issue of possibility or probability that this Court held the testimony was properly admitted to show that trauma could cause such a displacement. There was no intention in that case to overrule any of the cases immediately cited above.
As the above mentioned testimony of Dr. Mostwill was insufficient to support a rational conclusion in support of the claim of the plaintiff relative to a possible disc injury, its consideration was properly withdrawn from the jury.
V
We are unable to discover any merit in the next point raised by the appellant. She asserts that it was reversible error for the trial court to have stated in his charge to the jury that there was a "sharp conflict" in the evidence regarding whether the appellant was injured in the collision. A reading of the record discloses that this was a fact, and the trial judge was fully justified in so stating, after having told the jury that they should determine the facts, and what he said concerning the facts was not binding upon them. Gen. Rules of Prac. and Proc., Part Three, III, Trials, Rule 6 (b) (2). New rule 554 b 2.
VI
We are, likewise, unable to discover any merit in the next claim of the appellant. She argues that it was reversible error for the court to have instructed the jury that under the evidence it was possible for them to return a verdict in favor of both defendants, because such a verdict could only be predicated upon one possibility, namely, that the appellant was not injured in the accident. If we assume, without deciding, this predicate to be true, it is, nevertheless, peculiarly within the province of the jury to determine whether or not the appellant actually received injuries that resulted from the collision; consequently, this instruction failed to constitute error.
*423 VII and VIII
The appellant further complains that the trial judge in his charge placed too much emphasis on the fact that the burden of proof was on the appellant and that one of the questions for the jury's decision was whether the appellant was injured. She states that this emphasis was supplied by repetition of these facts by the court. What the judge actually did was: he first delivered the main portion of his charge; and then he read to the jury, as a part of the charge, certain written prayers that had been presented by counsel. This did result in repetition. There can be no question that as a general rule neither instructions nor any of the postulates contained therein should be unduly repeated, since the tendency is to mislead and confuse the jury by placing excessive emphasis on particular points. 53 Am. Jur., Trial, sec. 559; 88 C.J.S., Trial, sec. 340. Cf. the following cases: Pettigrew v. Barnum, 11 Md. 434, 451; Green Ridge, etc. v. Brinkman, 64 Md. 52, 61, 20 A. 1024; Storr v. James, 84 Md. 282, 290, 35 A. 965. However, as soon as the repetitious nature of his charge was called to the court's attention, he immediately explained to the jury what he had done, and expressly informed them that no undue emphasis was intended. While undue repetition, in an instruction, of any of the points contained therein is not to be recommended, a violation of this rule is not reversible error, unless it reasonably appears that the jury has been misled. 3 Am. Jur., Appeal and Error, sec. 1118. After a careful reading of the court's charge, we are unable to conclude that the jury was confused or frustrated thereby.
IX
The appellant also claims that the trial court singled out the testimony of Mrs. Fleischer, one of the defendants below, and suggested it was unworthy of belief. The short and simple answer to this is that he did not do so. The court simply stated that from her testimony alone he was unable to obtain a definite view of just how the collision occurred. He immediately told the jury that they may have another recollection, or a different understanding, of her testimony, and as her testimony involved questions of fact, it was a matter for *424 the jury's determination. In addition, he had previously informed the jury that any comments he made comments he made concerning the facts during the charge were not in anywise binding upon them; that they were the sole judges of the facts; and that "in the realm of facts, the jury was supreme". We find no error in this point.
X and XI
The appellant offered into evidence an ordinance of Baltimore City (Baltimore City Code, 1950, Art. 29, sec. 21):
"When approaching and crossing any intersecting public or private street, the person operating a street car must have the same under control and must regulate the speed of said car according to what is reasonable and proper in view of the circumstances, surroundings and location; provided, however, that in crossing any such street or intersecting public highway or private street in the thickly congested or business parts of the city, such street car shall not be operated at a rate of speed exceeding fifteen miles an hour."
She maintains that the undisputed evidence disclosed that the collision occurred in a "thickly congested" part of the city, and, therefore, it was reversible error for the court to refuse to specifically instruct the jury with reference to the duties and obligations of the operator of the street-car created by said ordinance. As the latter part of the ordinance regulates the permissible speed at intersections in the "thickly congested" parts of the city, it is important to determine whether the collision happened at such a place. The only evidence relative thereto is the testimony of Mrs. Fleischer and several pictures taken at the scene. Mrs. Fleischer, when asked if it were not "pretty thickly populated" at that particular location, answered: "That's an opinion, I don't know if it is very largely populated." She further testified there were row houses within the block on one side of the street. The pictures disclose the row houses that are set well back from the street on a terrace, and a general residential neighborhood. Funk and Wagnalls New Standard Dictionary (1952 Ed.) *425 defines congested as follows: "encumbered or obstructed by accumulated mass or numbers; overcrowded". We do not feel called upon at this time to set forth a definition of "thickly congested" that would be applicable to all locations, but we are unable to conclude that the evidence established that the situs of the collision in this case was in a thickly congested part of the city.
This being so, the latter part of the ordinance has no application to this case. This Court, speaking through Judge Henderson in Crawford v. Baltimore Tr. Co., 190 Md. 381, 386, 58 A.2d 680, said: "In its present form the ordinance (the one under consideration when it was not applicable to a "thickly congested or business part" of the city) adds nothing to the reciprocal duty of due care imposed upon both parties. * * * While the scene of the accident * * * was not in the open country, the type of track construction both east and west of the crossing, and its location off the travelled portion of the highway (as in the case at bar), both permit greater speed between crossings and afford notice of danger to the travelling public". See also Gross v. Balto. Transit Co., 192 Md. 278, 64 A.2d 147. The appellant, however, further contends that she was entitled as a matter of right to have the jury instructed as to every detail of the duties of the operator of the motor-car, such as his duty to keep a proper lookout, to have the car under proper control and to regulate the speed of his car according to what is reasonable and proper in view of the circumstances, etc. While there is no objection to the trial court's pointing out any and all of the reciprocal duties and obligations of the respective parties in minute detail, there is no obligation that it do so, provided the subject is fully and comprehensively covered in the charge to the jury. Gen. Rules of Prac. and Proc., Part Three, III, Trials, Rule 6 (b) (1). New rule 554 b 1. Singleton v. Roman, 195 Md. 241, 248, 72 A.2d 705. The adoption of the principle suggested by the appellant could lead to requests for myriad infinitesimal elaborations, better calculated to confuse than to clarify. In the instant case, the ordinance had been admitted into evidence. Appellant's counsel had a perfect right to argue any and all of its pertinent *426 provisions that were within the instructions of the trial court. Her counsel, likewise, could have argued any legal duty or obligation on the part of the operator of the street-car that did not contravene the instructions of the court. We think the trial judge, in his charge, fully and properly informed the jury concerning the duties of the defendant below, The Baltimore Transit Co., and that it was not incumbent upon, but discretionary with, him as to whether or not each detailed duty or obligation should have been mentioned in his charge.
XII
The twelfth point made by the appellant is that the trial court should have added to the charge which it gave the specific instruction that the operator of a Baltimore Transit vehicle owed a duty to his passengers to keep a proper lookout. The failure of the trial judge to make this amplification, she charges, constitutes reversible error.
While it is not unusual and, perhaps, it is preferable to grant this kind of instruction, what we have said immediately above fully answers this contention. Cf. Sugar v. Hafele, 179 Md. 75, 82, 83, 17 A.2d 118; Evans v. Capital Transit Co. (Mun. Ct. of App. D.C.), 39 A.2d 869, 870, 871.
XIII
The trial court refused the appellant's fifth prayer, which in effect required a finding for the appellant against the transit company if the jury found the latter guilty of negligence contributing to the happening of the accident, because of the transit company's duty to exercise the highest care for her safety. She makes this refusal her thirteenth assignment of error. While the transit company practically concedes the correctness of the prayer, it is unnecessary for us to pass thereon, as the court included all of its essential elements in his charge. At one point therein, he stated:
"The street car company owed the Plaintiff the highest degree of care consistent with its undertaking, which was to carry passengers safely. A street car company is not an insurer of the safety of passengers. But it must use the highest degree of care consistent with its undertaking."
*427 And the court told the jury practically the same thing on at least two other occasions during his charge. If we assume, without deciding, the prayer were a good one, it was not compulsory that the court grant it, if the essential elements thereof were fairly covered in the charge. Gen. Rules of Prac. and Proc., Part Three, III, Trials, Rule 6 (b) (1). New rule 554 b 1. Singleton v. Roman, supra. We are unable to discover any substance in this complaint.
XIV
Again, the appellant complains of repetition. This time, it concerns the trial court's stating to the jury that the transit company was not an insurer of the safety of its passengers, which he rephrased and explained to the jury. The appellant admits the accuracy of the court's statement, but complains of its repetition. What we said above in regard to repetition, also applies here. We find no error here.
XV
The appellant argues that it was reversible error for the trial judge to have eliminated Alan Fleischer, the owner of the automobile driven by his wife, Rosa Fleischer, from the trial, because, after proof by the appellant of ownership of the car in Alan Fleischer, there was a presumption that the operator thereof was acting as Fleischer's agent within the scope of the agent's employment. The question obviously is moot. Fleischer was not in the automobile at the time of the collision. The jury found that the driver of the car, Fleischer's wife, was not liable for the alleged injuries. If this be so, the husband would not be liable merely as the principal of a blameless driver. Barone v. Winebrenner, 189 Md. 142, 55 A.2d 505.
XVI
The appellant's final complaint is that counsel for the transit company was permitted, over objection, to inquire of Dr. Merrill, one of appellant's medical experts, as to how many times the doctor had examined persons referred to him by counsel for the appellant. This Court has held on many occasions that evidence tending to establish possible interest, *428 bias or prejudice on the part of a witness is admissible as an aid in testing the weight and credit to be afforded his testimony. A situation, almost identical to the one in this case, arose in the Supreme Court of Missouri in the case of Lammert v. Wells, 13 S.W.2d 547. That court held that the evidence tended to show the relation existing between the witness and the attorney, and was proper for the consideration of the jury as showing possible interest or bias. See also Zarinsky v. Kansas City, etc. (Mo. App.), 186 S.W.2d 854, and Dempsey v. Goldstein Bros., etc. (Mass.), 121 N.E. 429. We hold the evidence was admissible.
As we find no error in the record, the judgment will be affirmed.
Judgment affirmed, with costs. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544207/ | 213 Md. 658 (1957)
132 A.2d 592
HART
v.
WARDEN OF MARYLAND PENITENTIARY
[H.C. No. 4, September Term, 1957 (Adv.).]
Court of Appeals of Maryland.
Decided June 7, 1957.
Before BRUNE, C.J., and COLLINS, HENDERSON, HAMMOND and PRESCOTT, JJ.
COLLINS, J., delivered the opinion of the Court.
This is an application by Paul K. Hart for leave to appeal from the denial of a writ of habeas corpus.
Petitioner, through his attorney, contends that he was convicted in the Criminal Court of Baltimore on January 31, 1947, for the crime of assault with intent to rob with a deadly weapon and was sentenced to a term of fifteen years. He contends that the maximum sentence under the law for that crime was ten years under Chapter 449, Acts of 1931, 1939 Code, Article 27, Section 13, and since he has served ten years, he should be released. That Section provides in part: "Every person convicted of the crime of an assault with intent to rob, murder or have carnal knowledge of a female child under the age of fourteen years, shall be sentenced to confinement in the Maryland Penitentiary for not less than two years or more than ten years; * * *."
Although the docket entries in this case show that petitioner was convicted of "assault to rob with a deadly weapon", the first count of the indictment, upon which he was found guilty, reads in part that the accused on December 16, 1946, "with a certain dangerous and deadly weapon, to wit, a pistol, in and upon one Albert Lane, feloniously did make an assault, with intent then and there him the said Albert Lane in bodily fear and danger of his life then and there feloniously to put, and certain monies and other goods and chattels of the said Albert Lane then and there being, from the person and against the will of the said Albert Lane then and there feloniously and violently to steal, take and carry away; contrary to the form of the Act of Assembly in *660 such case made and provided, and against the peace, government and dignity of the State."
Chapter 84, Acts of 1945, Code, 1947 Supplement, Article 27, Section 558A, in effect when the alleged crime was committed and at the time of trial, in prescribing the form of indictment for robbery with a dangerous or deadly weapon and "attempt to rob with a dangerous or deadly weapon" states that the indictment shall be substantially as follows: "* * * feloniously with a dangerous and deadly weapon did rob C-D (or did attempt with a dangerous and deadly weapon to rob C-D, as the case may be) and violently did steal (or attempt to steal, as the case may be) from him ___________________ dollars (here list property stolen); contrary to the form of the Act of Assembly in such cases made and provided and against the peace, government and dignity of the State." By Chapter 457, Acts of 1927, Code, 1939, Article 27, Section 558, in effect when the crime was committed and the case tried, the penalty for the crime of robbery "or attempt to rob with a dangerous or deadly weapon" was imprisonment in the Maryland Penitentiary for not more than twenty years.
The second count of the indictment was evidently the charge under Section 13, supra. It reads in part as follows: "* * * in and upon one Albert Lane, feloniously did make an assault, with intent then and there him, the said Albert Lane in bodily fear and danger of his life then and there feloniously to put and certain moneys and other goods and chattels of the said Albert Lane, then and there being, from the person and against the will of the said Albert Lane, then and there feloniously and violently to steal, take and carry away; contrary to the form of the Act of Assembly in such case made and provided and against the peace, government and dignity of the State."
Assuming, without deciding, that the alleged excessiveness of sentence can be considered on habeas corpus, Roberts v. Warden, 206 Md. 246, 111 A.2d 597, it is evident in this case that petitioner was convicted of attempt to rob with a dangerous or deadly weapon. Therefore, under the provisions of Section 558, supra, he could have been given the sentence of twenty years and, of course, the sentence of fifteen *661 years was within the maximum. Halderman v. Supt., Maryland State Reformatory for Males, 195 Md. 699, 72 A.2d 718.
Application denied, with costs. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544580/ | 68 B.R. 541 (1986)
In re Sondra Lou GORMAN, Debtor.
In re Lou Aileen GORMAN, Debtor.
In re John Douglas GORMAN and Christina Lynne Gorman, Debtors.
Bankruptcy Nos. 86-66 to 86-68.
United States Bankruptcy Court, D. Vermont.
November 14, 1986.
C. Nicholas Burke, Plante, Richards, Terino & Hanley, White River Junction, Vt., for Estate of Sherman W. Melendy.
E. Patrick Burke, Ryan, Smith & Carbine, Rutland, Vt., for Dartmouth Sav. Bank.
Jerome I. Meyers, White River Junction, Vt., for debtors.
William H. Rice, Office of the Atty. Gen., Montpelier, Vt., for Vermont Rehabilitation Corp.
Ernest P. Sachs, Davis, Rounds & Sachs, P.C., Windsor, Vt., for Richard Michaelenoick d/b/a Redwater Blueberry Farms and Nursery.
Opinion & Order on the Objections to Debtors' Homestead Exemptions
FRANCIS G. CONRAD, Bankruptcy Judge.
The debtors have claimed homestead exemptions for a property referred to as The Ledges Apartments. Several creditors have objected to these claims, alleging that the debtors conveyed the property to a Vermont partnership, also known as The Ledges Apartments, that the debtors had formed. They contend that this entity and not the debtors is the owner of the property the debtors claim as exempt. The debtors reply that the deed the objecting creditors are relying on and two earlier deeds in the chain of title are defective and that a later corrective deed demonstrates that title to The Ledges Apartments is in the debtors as tenants in common. Because we hold that these defects, even if they were significant, have been remedied by corrective deeds that established that the *542 title the debtors conveyed to the partnership was good, we sustain the creditors' objections to the claimed homestead exemptions.
Objections to the debtors' claim that The Ledges Apartments is an exempt homestead were filed by the Dartmouth Savings Bank, by Richard Michaelenoick d/b/a Redwater Blueberry Farms and Nursery, and by the Vermont Rehabilitation Corporation, to which the Randolph National Bank assigned its mortgage. The debtors, the Vermont Rehabilitation Corporation, and Dartmouth Savings Bank filed memoranda of law. On August 6, 1986 we held an evidentiary hearing on the creditors' objections. After the hearing, the debtors and the Vermont Rehabilitation Corporation filed supplementary memoranda. In reaching our conclusions, we considered the documentary evidence, the arguments of counsel, and the parties' several memoranda of law.
The Vermont statute under which the debtors are claiming homestead exemptions, 27 V.S.A. § 101, requires that a debtor own the property claimed as exempt. The statute provides:
The homestead of a natural person consisting of a dwelling house, outbuildings and the land used in connection therewith, not exceeding $30,000.00 in value, and owned and used or kept by such person as a homestead together with the rents, issues, profits and products thereof, shall be exempt from attachment and execution except as hereinafter provided.
Ownership of the property as of the date of the filing of the petition for relief is a prerequisite for the assertion of a homestead right. See In re Avery, 41 B.R. 224, 226, 12 B.C.D. 162 (Bkrtcy.D.Vt.1984); Thorp v. Thorp, 70 Vt. 46, 49-50 (1897). Under Vermont law, it is the partnership as a separate legal entity and not the individual partners that owns real property acquired by the partnership. See 11 V.S.A. §§ 1163, 1282(a).
The following deeds reflecting transfers of the claimed property were introduced in evidence:
(A) Warranty deed from Charles B. and Phyllis S. JOHNSON to Lou Aileen Clark GORMAN, dated February 1, 1965, and recorded in Book 31, page 316, of the land records for the Town of Norwich.
(B) Warranty deed from Lou Aileen GORMAN to John J. LONG, Jr., dated October 26, 1977, filed October 27, 1977, and recorded in Book 57, pages 74-76, of the land records for the Town of Norwich. This deed recites that "[t]his is a straw conveyance for the sole purpose of placing title to the within granted premises in the names of Lou Aileen Gorman, Sondra Lou Gorman, and John Douglas Gorman as tenants in common, and the grantor has no other interest herein."
(C) Quitclaim deed from John J. LONG, Jr. to Lou Aileen, Sondra Lou, and John Douglas GORMAN, dated October 26, 1977, filed October 27, 1977, and recorded in Book 57, pages 77-79, of the land records for the Town of Norwich. This deed recites that "[t]his is a straw conveyance for the sole purpose of placing title to the within granted premises in the names of Lou Aileen Gorman, Sondra Lou Gorman, and John Douglas Gorman as tenants in common, and the grantor has no other interest herein."
(D) Warranty deed from Lou Aileen, Sondra Lou, and John Douglas GORMAN, tenants in common, to THE LEDGES APARTMENTS, a Vermont Partnership, dated October 26, 1977, filed October 27, 1977, and recorded in Book 57, pages 80-82, of the land records for the Town of Norwich.
(E) Warranty deed from Lou Aileen GORMAN to John J. LONG, Jr., dated October 28, 1977, filed October 28, 1977, and recorded in Book 57, pages 87-89, of the land records for the Town of Norwich. This deed recites that "[t]his is a straw conveyance for the sole purpose of placing title to the within granted premises in the names of Lou Aileen Gorman, Sondra Lou Gorman, and John Douglas Gorman as tenants in common, and the grantor has no other interest herein." The deed further recites that "[t]he purpose *543 of this deed is to correct and modify the deed recorded in Book 57 at Page 74 wherein one of the witnesses to the grantor's signature was the grantee thereunder. The correction and modification consists in the use of two witnesses, neither of whom is the grantee hereunder."
(F) Quitclaim deed from John J. LONG, Jr. to Lou Aileen, Sondra Lou, and John Douglas GORMAN, dated October 28, 1977, filed October 28, 1977, and recorded in Book 57, pages 90-92, of the land records for the Town of Norwich. This deed recites that "[t]his is a straw conveyance for the sole purpose of placing title to the within granted premises in the names of Lou Aileen Gorman, Sondra Lou Gorman, and John Douglas Gorman as tenants in common, and the grantor has no other interest herein." The deed further recites that "[t]he purpose of this deed is to correct and modify the deed recorded in Book 57 at Page 77 wherein one of the witnesses to the grantor's signature was grantee thereunder. The correction and modification consists in the use of two witnesses, neither of whom is a grantee hereunder."
On October 24, 1983, Sondra Lou Gorman, as duly authorized agent of the partnership The Ledges Apartments, gave a mortgage to the Dartmouth Savings Bank. On October 12, 1984, each of the four partners, Lou Aileen Gorman, Sondra Lou Gorman, John Douglas Gorman, and John Douglas Gorman's wife, Christina Lynne Gorman, on behalf of The Ledges Apartments, gave a mortgage to the Randolph National Bank. On July 23, 1985, the Randolph National Bank assigned the mortgage to the Vermont Rehabilitation Corporation. These deeds and mortgages are all properly recorded in the Town Clerk's Office in Norwich, Vermont.
The debtors' argument, to the extent we have succeeded in unraveling it, appears to be that the two corrective deeds (E) from Lou Aileen Gorman to John J. Long, Jr., and (F) from John J. Long, Jr., to the Gormans establish title in the debtors individually. The debtors take the position that the straw deed (B) from Lou Aileen Gorman to John J. Long, Jr. is defective because the grantee, John J. Long, Jr., served as one of the witnesses; that the quitclaim deed (C) from John J. Long, Jr. to the Gormans is likewise defective because one of the grantees, Lou Aileen Gorman, was an acknowledging witness; and that the warranty deed the objecting creditors are relying on (D) from the Gormans as tenants in common to the partnership is defective because the description of the property refers to the allegedly defective earlier quitclaim deed (C) from Long to the Gormans. The debtors insist that, since the two most recent deeds in the chain of title, the two corrective straw deeds (E) from Lou Aileen Gorman to Long and (F) from Long to the Gormans as tenants in common, recite as their purpose placing title in the Gormans as tenants in common, the debtors own the property and can claim a homestead exemption under Vermont law. Furthermore, because the corrective deed (F) from Long to the Gormans was a Quitclaim deed, the debtors argue that none of the deeds before (E) Lou Aileen Gorman's corrective warranty deed to Long except the deed (A) from the Johnsons to Lou Gorman is relevant.
Assuming, without deciding the question, that the Gormans did not convey to the partnership good title to the property because the earlier deeds (B) from Lou Gorman to Long and (C) from Long to the Gormans were fatally defective, as the grantor feared, because in each instance a grantee, an incompetent witness, acknowledged the instrument,[1] the question then *544 becomes what the present status of the corrective deeds is. The debtors argue that these deeds reflect no intention on Lou Aileen Gorman's part to reconvey the property to the partnership. The difficulty with the debtors' argument is that it distorts the purpose of the two corrective deeds by relying only on the language in each deed that gives as the sole purpose of the straw conveyance "placing title to the within granted premises in the names of Lou Aileen Gorman, Sondra Lou Gorman, and John Douglas Gorman as tenants in common . . ." Immediately afterwards, however, each of the two corrective deeds indicates that its purpose "is to correct and modify" the parallel earlier deed, specifically identified by the book and page where it was recorded, because one of the witnesses was a grantee under that deed. The stated purpose of the corrective deeds to serve as straw transactions between Lou Aileen Gorman, John J. Long, Jr., and the Gormans as tenants in common is simply a reiteration of the purpose recited in the original straw deeds. Deed (E) was expressly intended to correct deed (B), and deed (F) to correct deed (C), and so could not affect the conveyance (D) from the individual partners to the partnership. Therefore, whether we regard the original straw deeds as effective, and the corrective straw deeds as nugatory, or regard the corrective deeds as curing any defect in the earlier deeds, the transfer (D) from the Gormans as tenants in common to the partnership conveyed valid title to the property claimed as exempt.[2]
The debtors second argument is no more than a variation on their original argument. They suggest that, because Long's corrective straw deed (F) to the Gormans as tenants in common is a quitclaim deed, the deed (D) from the Gormans to the partnership is of no force or effect. Since the deed (F) from Long to the Gormans is a quitclaim deed, the debtors reason, the Gormans' "after-acquired" interest in the property does not inure to the benefit of the partnership as a prior grantee under the deed (D) from the Gormans. See Munson v. Goodro, 124 Vt. 282, 284, 204 A.2d 126 (1964). The debtors are in the untenable position of arguing that the corrective straw deeds are not valid to correct, as they explicitly recite, the earlier straw deeds, but nevertheless are valid as a new transaction to convey the property to the debtors. The difficulty here again is the assumption that the corrective deeds, despite their stated purpose, operate independently at the time of their execution. The corrective straw deeds relate back to the original straw transaction, which they attempt to recreate exactly without the possibly defective acknowledgement. To the extent the corrective deeds were necessary, their place in the chain of title is before, not after, the critical deed (D) from the Gormans to the partnership.[3] Since we hold that the corrective straw deeds effectively accomplished their stated purpose of rectifying the record of the original straw transaction, even if the transaction was undermined by the defective acknowledgement, we need not address the parties' other arguments.
Accordingly, we ORDER that the objections of the Dartmouth Savings Bank, Richard Michaelenoick d/b/a Redwater Blueberry Farms and Nursery, and the Vermont Rehabilitation Corporation to the debtors' claim of a homestead exemption in *545 the property known as The Ledges Apartments be SUSTAINED.
NOTES
[1] See Sheldon Slate Products Co. v. Kurijaka, 124 Vt. 261, 267-68, 204 A.2d 99 (1964) (execution and delivery of the deed, though defective because unwitnessed, was nevertheless evidence tending to show an agreement by grantors to execute a valid deed); Vermont Accident Insurance Co. v. Fletcher & Fletcher, 87 Vt. 394, 397, 89 A. 480 (1914) (an unacknowledged deed may be effective between the parties). But see Day v. Adams, 42 Vt. 510, 514-15 (1869) (under former statute, a deed having only one instead of two witnesses is invalid). The statute, which still requires two witnesses, is now 27 V.S.A. § 341.
[2] We also note that, since the debtors gave the partnership a warranty deed to the property, they are now in a position of attacking the title that they warranted in this deed (D) to defend. What is more, in 1983 and 1984 the partnership gave mortgages to the Dartmouth Savings Bank and to the Randolph National Bank.
[3] Even if were to ignore the remedial purpose of the two corrective deeds and treat the transfer by warranty deed (D) from the Gormans to the partnership as a transfer of after-acquired property acquired by virtue of the corrective quitclaim straw deed (F) from Long to the Gormans, which transferred (E) Lou Gorman's warranted interest to Long, the warranty deed (D) from the Gormans to the partnership passed the Gormans' after-acquired title to the partnership. See Cross v. Martin, 46 Vt. 14, 18 (1873); Middlebury College v. Cheney, 1 Vt. 336, 349 (1828). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544626/ | 97 N.J. Super. 406 (1967)
235 A.2d 219
SARAH A. MANNING, PLAINTIFF-RESPONDENT,
v.
JACOB S. KASDIN, RUTH KASDIN, DAVID MUSS AND ANABELL MUSS, DEFENDANTS-APPELLANTS.
Superior Court of New Jersey, Appellate Division.
Argued September 11, 1967.
Decided November 1, 1967.
*409 Before Judges CONFORD, COLLESTER and LABRECQUE.
Mr. Richard E. Friedman argued the cause for appellants (Messrs. Friedman, Grundman & Friedman, attorneys).
Mr. Stewart G. Pollock argued the cause for respondent (Messrs. Schenck, Price, Smith & King, attorneys; Mr. John J. Harper, on the brief).
The opinion of the court was delivered by CONFORD, S.J.A.D.
Defendant Kasdin purchased a tax sale certificate from the Township of Randolph on behalf of defendant Muss December 30, 1958. On October 30, 1961 Kasdin instituted an action to foreclose the certificate, which covered property denominated on the municipal tax records as "Black River 28.8 acres Block 7, Lot 6" and assessed to "unknown." A final judgment was entered by default in the foreclosure proceedings against "Unknown Owner" on April 23, 1962.
On January 13, 1965 plaintiff, claiming to be the owner of the property, brought the present action to vacate the foreclosure judgment on the grounds that she had a right to redeem the property and had been improperly omitted as a party defendant in the foreclosure action. Judge Waugh held in her favor and entered judgment in the Chancery Division declaring: (1) plaintiff and her late husband David M. Manning (who died April 12, 1959) were the holders of a two-thirds interest in Block 7, Lot 6 by virtue of a deed recorded September 11, 1957; (2) they continued *410 to hold that interest when defendants purchased the tax sale certificate; (3) that interest could have been ascertained by a reasonably diligent search of the premises in accordance with N.J.S.A. 54:5-91 and (4) plaintiff should have been named and served with process as a defendant in the foreclosure action. It was therefore adjudged that the judgment of foreclosure be vacated and that plaintiff should be permitted to redeem the lands from the tax sale certificate on the terms that she reimbursed defendants for the moneys they paid the township for taxes with 6% interest, and for their costs in obtaining title in the foreclosure action, plus reasonable search and counsel fees therein, but without costs to either party in the current action.
Defendant Muss now prosecutes this appeal alone. He is a civil engineer and surveyor, was formerly the engineer for Randolph Township, and prior to the foreclosure sale had been entrusted with revising the tax map for the municipality. Defendant's appellate brief framed his statement of questions involved and developed his argument on two basic points: (1) that plaintiff lacked the interest in the lands necessary for redemption because her paper title did not go back to the Proprietors and she failed to prove title by adverse possession; (2) plaintiff was estopped from claim of ownership because she or her husband had disclaimed ownership, thereby "inducing" Muss to acquire the property and expend funds on its improvement. There was only a tangential exception in that brief to the trial court's finding that plaintiff's interest in the property was ascertainable by the exercise of reasonable diligence by Muss and that she should accordingly have been joined in the tax foreclosure. However, since that determination was challenged in the reply brief and at oral argument (belatedly, we think), we shall lay the point at rest for the benefit of the bar.
Some further development of the facts is necessary.
*411 Two title experts testified on behalf of plaintiff. From their testimony and title records admitted in evidence the following appears. The record title interest of plaintiff and her husband (collectively referred to hereinafter as the Mannings) in the locus in quo derives from a deed to them recorded September 11, 1957 from George M. Harvey and others conveying a two-thirds interest in certain lands (the Mannings obtained the other one-third interest by subsequent deeds from various other holders thereof). Plaintiff's experts concluded, after an extended demonstration from and analysis of other title instruments, that the "Third Lot" mentioned in the 1957 deed from Harvey and Lot 6, Block 7 were "one and the same." The description in that deed of the "Third Lot" is by incorporation by reference of the description in a March 1832 deed from Gilbert Budd to John Corwin, and repeated verbatim in mesne deeds, but subject to an exception for a five acre tract conveyed out of the Third Lot by Isaac Corwin to Sylvester Harvey in 1884. The 1832 deed description does not read in terms of specified compass courses and fixed distances. The land is referred to as all of Budd's land "laying in the Swamp on the East side of Black river," and the description proceeds in terms of reference to the locations of lands of bounding property owners. The deed recites that the tract is "supposed to contain between three and four acres be the same more or less" (this estimate is apparently wrong as the 1884 conveyance out of the tract itself purports to encompass five acres). The description in the 1832 deed contains four calls to other lands of John Corwin, the grantee.
Distinct from the locus in quo, the Mannings on June 10, 1939 acquired by deed from Elizabeth Spingler a farm of some 60 acres and a farmhouse in which they resided most of the period of time since. That property is identified on the tax map as Lot 10, Block 6. It appears on the tax map directly east of and contiguous to Lot 6, Block 7, the property here in question. In the 1957 deed from Harvey *412 was also included a 16-acre tract identified on the tax map as Lot 7, Block 7. The Mannings had, however, been assessed for it since 1951. That parcel is north of and contiguous to Lot 10, Block 6 and east of and contiguous to Lot 6, Block 7. Plaintiff's expert Buck plotted the locations of these three tracts and other surrounding titles on his Exhibit P-16. Parcel A thereon is the main Manning homestead; Parcel C, the locus in quo; and Parcel B, the other tract conveyed to the Mannings by the 1957 deed. The three parcels constitute a contiguous assemblage bounded on the west by the Black River (Parcel C being westernmost). John Corwin was formerly a common holder of record title to all three parcels by deeds of grant in 1808 (Parcel A), 1815 (Parcel B) and 1832 (Parcel C).
It is of interest that the 1957 deed to the Mannings recites that it is made for the purpose of correcting an inadvertent omission by the grantors' ancestor, William Collis Harvey, in conveying in 1919 the present Manning homestead to Godin, Fox and Dropkin, to have included what is referred to above as Parcels C and B.
No deed into Gilbert Budd for the property he conveyed to Corwin in 1832 has been adduced. Defendant testified to an extensive investigation which he made purporting to show that the property in question was never conveyed out by the Proprietors. He testified further that although he knew, before he foreclosed the tax certificate, of the 1957 deed to the Mannings and the chain back to the 1832 deed from Budd, he could never locate the "Third Lot" mentioned in the 1957 deed.
Two roads depicted on a survey in evidence extend from Parcels A and B to Parcel C (identified above). A 68-year-old farmer who has lived all his life near the Manning farm testified that when the Harveys[1] owned the farm they used those roads in connection with their farming the land on the *413 locus in quo. They had maintained a field for grass and other products on the knoll located thereon, had a sand pit near there from which they hauled out and sold sand, and they hauled hay and grain which they raised there and "logged the woods." This witness was familiar with the Manning (Harvey) farm as extending to the Black River. He also testified that the Spinglers, who owned the farm from 1922 to the time the Mannings acquired it, also farmed the knoll on the locus in quo.
David Manning, son of the Mannings, testified that he and his parents planted about 1,000 Christmas trees on the knoll mentioned above and took some wood from the property. That area was also used by them for hunting and was posted against hunting by trespassers, the posts reading "D.M. Manning, owner." He testified, over objection, that his father had told him the property extended to the river.
I
By virtue of N.J.S.A. 54:5-90 a judgment in tax foreclosure against unknown owners is after five years precluded from attack on the ground of insufficient inquiry for the identity of any defendant "even though the same might have been ascertained by such inquiry." That bar does not apply to plaintiff as she brought this action within five years of the tax foreclosure judgment. As a matter of law, plaintiff should have been joined as a defendant in the foreclosure unless she was at the time an "unknown owner," within the definition of that term in N.J.S.A. 54:5-91, which reads as follows:
"Any person whose interest in the lands cannot, in the exercise of reasonable diligence, be ascertained from the search of the title of the premises described in the certificate of sale, made of the indexes in the office of the surrogate and county clerk or register of deeds and mortgages in the county in which the lands are situate, and in the office of the Secretary of State, extending back at least sixty years next preceding the date of the sale, shall be deemed to be included in the term `unknown owner' or `unknown claimant.'"
*414 Judge Waugh found that plaintiff was not an unknown owner, as so defined, and we agree. It is common knowledge among title lawyers that the seeker after the holder of title for a parcel of property for which no deed or other identification is readily available will, as one of several devices, trace the chains of title of owners of surrounding properties on the theory of former assemblage of large tracts in a common predecessor in title. A search of the Mannings' name in the grantee indices would of course disclose the 1957 deed and the chain of title antecedent thereto. Muss, in fact, knew of that chain. We are fully satisfied that for the reasons given in evidence by plaintiff's expert witnesses, which we need not here detail, and found convincing by the trial judge, Muss should have known (assuming, as he testified, that he did not know) that the land conveyed by the 1832 deed from Budd and designated as the Third Lot in the 1957 deed to the Mannings was the same property as Lot 6, Block 7. It follows that plaintiff's interest in Lot 6, Block 7 was one which could have been ascertained by the exercise of reasonable diligence by or on behalf of defendant. She should have been joined as party defendant to the foreclosure. N.J.S.A. 54:5-86.3.
II
The gravamen of this appeal is the argument that assuming Lot 6, Block 7 is covered by the 1832 and 1957 deeds aforementioned, those deeds did not transmit an ownership interest to the Mannings because Budd, who originated the chain of title in 1832, had no grant into him for the property. Defendant also argues that the evidence does not clearly establish a continuous, hostile period of adverse possession by the Mannings and their predecessors sufficient to confer title by adverse possession. We hold that conceding arguendo that the evidence before the court does not technically establish title by adverse possession, as such, or any paper title back of Budd, the Mannings nevertheless *415 possessed prima facie title adequate to found a right of redemption as against a tax certificate purchaser.
Under N.J.S.A. 54:5-54 timely redemption may be exercised by "[t]he owner, mortgagee, occupant or other person having an interest" in the land. The core question presented by defendant's argument is as to how perfect a title must be shown by one who asserts the right to redeem as an owner. In effect, defendant's contention is that a purported owner seeking redemption must show paper title back to the Proprietors, or, failing that, either strict adverse possession in the statutory sense for the requisite period or record title back to a holder by such adverse possession. Defendant cites no authority which in our view justifies any such conclusion.
Both sides cite and rely upon the opinion of Vice-Chancellor Leaming in Wills v. Windish, 106 N.J. Eq. 449 (Ch. 1930), wherein a holder of the paper title without possession sought redemption as against a tax sale certificate holder. The court upheld the right of redemption because the certificate holder had also preceded the plaintiff in her chain of title and was therefore deemed estopped to challenge her assertion of title. But in the course of its opinion the court implied that the title required to be established by the intending redeemer was such prima facie title as must be shown by a plaintiff in ejectment.[2] Citing Troth v. Smith, 68 N.J.L. 36 (Sup. Ct. 1902), and Rollins v. Atlantic City R.R. Co., 70 N.J.L. 664 (E. & A. 1904), the court stated that requirement as follows:
"[T]o establish a prima facie title to real estate a plaintiff in an action of ejectment who seeks to recover on a mere paper title must trace his paper title back to someone who is shown to have been in possession of the locus in quo, or, failing in that, must trace his paper title back to the council of proprietors." (at p. 451, of 106 N.J. Eq.)
*416 It is clear in the present case that plaintiff has shown a prima facie title within the foregoing formulation. She has both paper title from predecessors who exercised possession (whether or not of a quality sufficient to constitute adverse possession for the statutory period) and the status of one who has been in possession (through her late husband). To this defendant responds that while plaintiff may have prima facie title, that title is rebutted by the fact that the chain of title does not antedate the 1832 deed from Budd, and therefore title continues to reside in the Proprietors.
No case precisely in point has been cited to us in a tax certificate redemption context. However, if the ejectment analogy is correctly espoused by defendant, he would appear defeated by the holding in Licari v. Carr, 84 N.J.L. 345 (E. & A. 1913). That was an ejectment action (now an action for possession of lands) wherein defendant's claim by adverse possession was not established by the preponderance of the evidence. But on appeal defendant attacked the sufficiency of plaintiff's prima facie title, as does the present defendant, by contending that plaintiff's "record title * * * failed" because his chain of title, terminating with his deed of 1909, began in 1834 with no prior chain traceable back to the proprietors. The court held it sufficient that the plaintiff's title rested upon a paper title of over a half century together with possession of the property by himself and his ancestors under color thereof.
We need not here decide whether the ownership interest advanced to support a claim of redemption must be based upon a title as good as the prima facie title required of a plaintiff in an action for possession of lands, but if it must, Licari is dispositive against defendant. We have no doubt that plaintiff's chain of title of 130 years, coupled with the possessory activity of at least some of her predecessors in title, gives her the status of an "owner" entitled to redeem, within the reasonably inferable meaning of the term "owner" in N.J.S.A. 54:5-54.
*417 The foregoing conclusion would seem to be further supported by the apparent general assumption that a 60-year title search assures prima facie title. 13A N.J. Practice (Lieberman, Abstracts and Titles) (3d ed. 1966), § 1643, pp. 139-141; and see the requirement for a 60-year search in N.J.S.A. 54:5-91, quoted above.
If plaintiff has shown a prima facie title sufficient to support redemption, as we think she has, defendant's status as a tax certificate purchaser is subordinate thereto. A tax sale certificate merely conveys the lien interest of the taxing district. It embodies an inchoate interest entirely subject and subordinate to the statutory right of redemption by holders of an interest in the property before it can ripen into a fee by foreclosure of the right of redemption. Bron v. Weintraub, 79 N.J. Super. 106, 111-112 (App. Div. 1963), reversed on other grounds, 42 N.J. 87 (1964).
We conclude the Chancery Division was right in holding that plaintiff was vested with title adequate to permit her to redeem.
III
Defendant's claim of estoppel is founded on his testimony that he and Manning contested in bidding for the certificate at the tax sale and that Manning had told him, on inquiry before the sale, that he did not know who the owner was. Manning expressed concern when defendant outbid him because he wanted to own westward to the Black River. Thereafter defendant purchased a right of way to the property, which was landlocked, and made test borings and preliminary development plans while Manning assertedly "acquiesced" in silence.
The trial court failed to find any basis for an equitable estoppel against plaintiff, nor do we. Defendant was not relying upon anything said to him by Manning in deciding to bid for the certificate at the tax sale. He undoubtedly regarded the purchase as a good investment. There is no substantial basis to conclude that he omitted the Mannings as *418 defendants in the foreclosure because of anything said to him by Manning. He was undoubtedly thoroughly familiar with the property and its tax status by reason of his former position as township engineer and his revision of the tax map.
This case does not present any occasion for special application of the statutory direction of liberal construction of the tax foreclosure statute to encourage the barring of rights of redemption. N.J.S.A. 54:5-85. Cf. Bron v. Weintraub, supra (42 N.J., at pp. 91-92). There is here to be considered the contrasting principle that the right of redemption from tax foreclosure is to be liberally construed. Lake Waterloo Corp. v. Kestenbaum, 10 N.J. 525 (1952).
Plaintiff's motion to compel defendant to defray the cost of printing her appendix is denied.
Judgment affirmed; no costs.
NOTES
[1] William Collis Harvey owned Parcels A, B and C from 1896 to 1919.
[2] Now an action for possession of lands. N.J.S. 2A:35-1 to 3; R.R. 4:79. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544625/ | 388 B.R. 23 (2008)
In re Rupal J. SHAH, Debtor.
Micro Connections, Inc. and Vishnu Dayal, Plaintiffs,
v.
Rupal J. Shah, Defendant.
Bankruptcy No. 806-71581-478. Adversary No. 806-08450-478.
United States Bankruptcy Court, E.D. New York.
January 10, 2008.
*26 Certilman Balin Adler & Hyman, LLP, by Richard J. McCord, Esq., Carol A. Glick, Esq., East Meadow, NY, for Debtor-Defendant Rupal J. Shah.
Weinberg Gross & Pergament LLP, by Marc A. Pergament. Esq., Garden City, NY, for Plaintiffs Micro Connections, Inc. and Vishnu Dayal.
MEMORANDUM DECISION
DOROTHY EISENBERG, Bankruptcy Judge.
This matter is before the Court pursuant to an adversary proceeding commenced by Micro Connections, Inc. and Vishnu Dayal (collectively, the "Plaintiffs") against Rupal J. Shah (the "Debtor" or the "Defendant") seeking to have the Debtor's discharge denied pursuant to 11 U.S.C. §§ 727(a)(3) and (a)(4)(A).[1] Based on the facts of this case and the relevant case law, the Court finds that the Plaintiff is entitled to the relief requested on both counts. The following constitutes the Court's findings of fact and conclusions of law as mandated by Fed. R. Bankr.P. 7052.
BACKGROUND
The Plaintiffs in this adversary proceeding are Micro Connections, Inc. ("Micro") and Vishnu Dayal. The Plaintiffs are judgment creditors of the Debtor, having obtained a judgment against the Debtor in an action styled Rupal H. Shah v. Micro *27 Connections, Inc. and Vishnu Dayal, Index No. 28820/98 (the "State Court Action"), entered on January 12, 2006 in the amount of $162,000, with interest in the sum of $123,765.10 and costs and disbursements of $1,065.00, for a total sum of $286,830.10 (the "State Court Judgment"). The State Court Judgment was based on counterclaims asserted by the Plaintiffs herein and a determination after a bench trial that the Debtor had breached a consulting contract between the Debtor and Micro entered into on or about July 20, 1997 pursuant to which the Debtor was to run Micro's service department. The Debtor, who commenced the State Court Action, was unsuccessful on his cause of action against the Plaintiffs for services rendered and unpaid commissions. On July 10, 2006 (the "Petition Date"), the Debtor filed a petition for relief under Chapter 7 of the Bankruptcy Code.
FACTS
1. Debtor's borrowing history and income
The Debtor has a background in electronics and computers, having studied those subjects in college. (9/17/07 Trial Tr. ("Tr."), p. 5). From 1985 through the present, the Debtor has intermittently been in business for himself, and is not unsophisticated. (9/17/07 Tr., p. 5). The Debtor is married to Dipti Shah and resides with her and their three minor children in a one family dwelling located in Long Island, which the. Debtor and his wife own as tenants by the entirety (the "Residence"). The Debtor and Mrs. Shah purchased the Residence in November, 1993 for $134,200.00. (Trial Ex. 8). The Debtor and Mrs. Shah financed the purchase of the Residence by making a down payment in the amount of $15,397.28 and financing the remainder with a loan in the amount of $118,802.72 from Continental Mortgage Bankers, Inc. d/b/a Financial Equities, secured by a first mortgage on the Residence ("First Mortgage"). (Trial Ex. 8). Four years later, in November 1997, the Debtor and Mrs. Shah obtained a second mortgage on the Residence from the Bank of New York in the amount of $25,000 (the "Second Mortgage"). (Trial Ex.8).
Commencing in 1998, the Defendant and Mrs. Shah refinanced the First Mortgage and the Second Mortgage on the Residence, and refinanced their mortgage debt at least three more times through December, 2004. In addition, the Debtors obtained two home equity lines of credit during this same time period. Based on the Debtor's records and his testimony, the Debtor extracted a total of approximately $341,021 in equity from November, 1997 through October, 2005 from the mortgages and the lines of credit. (Trial Ex. 8). According to the testimony of the Debtor and Mrs. Shah, they used the money they cashed out from "these loans to cover some of their day to day living expenses. As of the Petition Date, Countrywide holds a first mortgage lien on the Premises with an outstanding balance of $190,799.76. Citibank holds a junior lien position on the Premises pursuant to a home equity line of credit ("Citibank HELOC") and is owed $219,611.18 as of the Petition Date. (Trial Ex. 11).
The Debtor and Mrs. Shah filed joint federal and state income tax returns for tax years 2000 through 2005, with the exception of tax year 2002. (Trial Ex. 12, 13, 15, 16 and 17). No tax return was filed by the Debtor for tax year 2002. According to the Debtor, he was not obligated to file tax returns for 2002 because he earned no income that year. Based on these tax returns, the Debtor and Mrs. Shah earned the following amounts or borrowed funds through refinances or home equity loans *28 for their use, after repayment of prior debt:
Wages Loans
2000 taxable wages of $107,299.00
2001 taxable wages of $133,097.00
2002 no record provided $52,665.40 utilized through April, 2003
2003 taxable wages of $6,341.00 $15,896.45
2004 taxable wages of $106,493.00 $41,000.00 and $57,521.75
2005 taxable wages of $35,891.00 $76,500.00 utilized through July 10,
2006
2. The Petition, Schedules and Statement of Financial Affairs
On the Petition Date, the Debtor filed Schedules and the Statement of Financial Affairs along with the petition. (Trial Ex. 11). On November 14, 2006, prior to the commencement of this adversary proceeding, the Debtor filed amended Schedules and Statement of Financial Affairs ("First Amendment to the Petition"). On May 4, 2007, approximately five months after the commencement of this adversary proceeding, the Debtor filed additional amendments to the Schedules and Statement of Financial Affairs ("Second Amendment to the Petition"). On the Schedules as originally filed, Schedule A lists the Debtor's ownership interest in the Residence as "Joint." (Trial Ex. 11). Schedule B lists two checking accounts currently held by the Debtor; a "Citibank Checking" account and an "Astoria Federal Savings Checking" account. Each account is listed as having less than $100.00 in value as of the Petition Date. Listed among the automobiles owned by the Debtor is a 2000 Chevrolet Suburban, which is listed as "voluntarily surrendered." (Trial Ex. 11). Schedule H, which requires the Debtor to list all co-debtors, contains no co-debtors. (Trial Ex. 11). Mrs. Shah is not listed as a co-debtor with respect to the debts encumbering the Residence on this Schedule, nor is she listed as a co-debtor on the Debtor's listed credit card accounts.
In Schedule J as originally filed, regarding the Debtor's income, the following sentence was typed in: "The Debtor and Debtor's spouse have depleted their savings as well as their home equity line of credit with Citibank in order to remain current with their mortgage and their monthly expenses." (Trial Ex. 11). However, the Schedules do not list any savings accounts owned by the Debtor.
The Debtor's Schedule J as originally filed includes a monthly car expense in the amount of $456.61 for the Debtor's 2000 Chevrolet Suburban. However, the Debtor's Statement of Financial Affairs contains contradicting information. In response to item 5 in the Statement of Financial Affairs entitled "Repossessions, foreclosures and returns" the 2000 Chevrolet Suburban is listed, and is described as "surrendered pursuant to Sheriffs Execution." According to the Debtor's testimony at trial, the Chevrolet Suburban was returned to the Debtor by the Sheriff post petition and on July 30, 2006, the Debtor returned the Chevrolet Suburban to the lien holder. (9/17/07 Tr., pp. 169-171). Therefore, the Debtor's inclusion of the monthly car loan payment for the 2000 Suburban in Schedule J, which was never corrected in the First or Second Amendment to the Petition, was inaccurate and misleading.
In response to item 1 of the Statement of Financial Affairs entitled "Income from employment or operation of business," which requires the Debtor to list all income *29 earned in calendar year 2006, the Debtor indicated he had no such income. This response is incorrect. The Debtor's former employer, Allstate Insurance Company ("Allstate") was making monthly payments to the Debtor in the amount of approximately $900 per month from February or March, 2006 through the Petition Date and thereafter (the "Allstate Payments"). The Debtor received the Allstate Payments pursuant to his termination from his employment with Allstate as an insurance agent. (9/20/07 Tr., p. 102). Under his agreement with Allstate, the Debtor was entitled to receive a total of $10,800.00. It is unclear if the Debtor received other income from any other source as ho tax returns for 2006 had been filed as of the conclusion of the trial.
Instead of listing the Allstate Payments in item 1 of the Statement of Financial Affairs, the Debtor set forth information regarding the Allstate Payments in response to item 22r-b of the Statement of Financial Affairs entitled "Former partners, officers, directors and shareholders." However, this question pertains only to debtor corporations or partnerships, not to individual debtors. The failure to properly set forth the income he received from Allstate in 2006 in response to item 1 of the Statement of Financial Affairs, which failure was never corrected in the First or Second Amendment to the Petition, constitutes a false oath, or at best, a material misstatement.
Pursuant to item 3 of the Statement of Financial Affairs entitled "Payments to creditors," the Debtor was required to disclose any payments he made for sums greater than $600.00 to all creditors for loans, installment purchases of goods or services and other debts within 90 days prior to the Petition Date. The Debtor only listed one payment made to Citibank Checking Plus in the amount of $2,000.00 in April, 2006, and did not disclose numerous payments to other creditors made during this time period, as evidenced by his bank statements. (Trial Ex. 25).
In response to item 11, "Closed financial accounts," the Debtor stated that no financial accounts or instruments held in the name of the Debtor or for the benefit of the Debtor were closed, sold or otherwise transferred within one year prior to the Petition Date. The Debtor never changed his answer to this item in the First or Second Amendment to the Petition.
In response to item 18, "Nature, location and name of business," the Debtor listed 1 State Agency, Inc. ("1 State") as a business owned by the Debtor, and described it as "currently inactive." The Debtor also listed 1 State in his Schedules as an asset with no value.
The Debtor incorporated 1 State Agency, Inc. ("1 State") in October 2004 to coincide with his employment by Allstate as an insurance agent pursuant to the Allstate Exclusive Agency Agreement. (Trial Ex. 19). Based on the documentary evidence and the Debtor's testimony, it appears that the Debtor formed 1 State as a subchapter S corporation to operate his insurance agency business through a corporate entity. Through 1 State, the Debtor entered into a real property lease with WMS Realty, Inc. as the landlord for the premises located in Southampton, New York (the "Southampton Office"). From the Southampton Office, the Debtor conducted his insurance agency business. The Debtor testified that Allstate paid the Debtor, not 1 State, for all compensation due to the Debtor. (9/20/07 Tr., p. 72). State and federal income tax returns for 1 State were filed by the Debtor. A bank account for 1 State was opened at Citibank on June 21, 2005, bearing account no. xxxx521 (the "1 State Account"). (Trial Ex. 30). The Debtor testified that he terminated *30 relationship with Allstate in February, 2006, less than one year later. In February, 2006, the real property lease between 1 State and WMS Realty, Inc. was terminated. (Trial Ex. 11).
Despite the fact that the Debtor was no longer employed by Allstate as of February, 2006, the 1 State Account remained active, with debits and withdrawals in the amount of $1,255.15 and deposits and credits in the amount of $1,179.30 for the time period from May 18, 2006 through June 19, 2006. The Debtor's description of 1 State as "currently inactive" in his Schedules is belied by the 1 State Account, which reflects these deposits and withdrawals within one month of the Petition Date. Although the Debtor may assert that this activity did not reflect any actual business activity of 1 State, the Debtor's description of the business as "currently inactive" is inaccurate and misleading.
The Debtor did not list any other business interests in response to item 18 of the Statement of Financial Affairs as initially filed. In the First Amendment to the Petition, the Debtor amended his response to item 18 to include a reference to Global Business Development Group, Inc. ("GBD"). (Trial Ex. 11). In the response to item 18, GBD is described as "closed" as of August 28, 2006. (Trial Ex. 11). The Debtor testified that he did not list GBD as a corporation in which he had an ownership interest in the original Statement of Financial Affairs because he was under the impression that the Debtor's accounting firm of Bharat R. Magdalia, C.P.A. (the "Accountants") had dissolved GBD prior to the Petition Date. (9/17/07 Tr., p. 153). The Debtor also testified that GBD ceased its business activities in late 2003 or early 2004. (9/20/07 Tr., pp. 74-75).
The Debtor testified that GBD was a subchapter C corporation, formed by the Debtor for the purposes of engaging in business as a technology and software consulting firm. (9/17/07 Tr., p. 9).[2] On January 18, 2002, a bank account was opened at Citibank in the name of GBD with an account number of xxxxxx208 (the "GBD Account"), and an initial deposit of $2,500 was made into the GBD Account. (Trial Ex. 31). GBD operated out of business premises located in Ronkonkoma, New York, leased from Kunkel Realty, Inc. from approximately August, 2002 through April 2003, as reflected in the GBD Account bank statements and canceled checks. (Trial Ex. 31). Thereafter, the Debtor operated GBD from the Residence. (Trial Ex. 31). Initially the Debtor was the President and sole shareholder of GBD. At some point thereafter, Mrs. Shah became a 10% shareholder of GBD, although she denied any knowledge of her ownership interest in GBD. (9/17/07 Tr., pp. 9-10; 9/20/07 Tr., pp. 21-22). The Debtor produced no corporate tax returns for GBD, but did file Federal and New York State Applications for Extensions of Time to File Corporation Income Tax Returns for the tax years 2003 and 2004, when GBD was the most active. As of the Petition Date, GBD had not been dissolved and no tax returns were filed on its behalf.
3. The Debtor's Production of Bank Records
On October 24, 2006, the Court issued an Order authorizing a Rule 2004 subpoena for the Debtor and Mrs. Shah. In Schedule A to the subpoena, the Plaintiff requested the production of, inter alia, all bank statements and canceled check for all *31 accounts in which the Debtor was an owner, joint owner or signatory from January 1, 2000 through July 10, 2006. In response to this particular request, the Debtor only produced documents relating to the current and past home equity lines of credit, the 1 State Account, a minor bank account maintained at Astoria Federal Savings Bank and bank records from the Debtor's primary joint checking account, maintained at Citibank for 2005 and 2006. (Trial Ex. 38).
After this adversary proceeding was commenced on or about December 4, 2006, the Plaintiffs served the Debtor a subpoena for his examination, which examination took place on April 18, 2007. At that deposition, the Plaintiffs requested that the Debtor produce certain documents and information, including tax records and the missing bank statements. The Debtor failed to produce the documents, even after the Plaintiffs reiterated their request by letter dated May 7, 2007. On May 8, 2007, based on the Debtor's failure to produce the documents requested, the Plaintiffs filed a motion with this Court seeking to compel the Debtor to produce the documents previously requested. It was not until June 22, 2007 that the Debtor produced the bulk of the missing documents. (Trial Ex. 31). The bank statements for GBD had not been produced until May 2007.
According to the Debtor, the delay was attributable to his poor filing system at home, and the fact that some of the bank records had to be retrieved from the Accountant or from the banks in question. (9/17/07 Tr., p. 58). According to the Debtor, he had to look "high and low" all over his house to locate all of the bank records. (9/27/07 Tr., p. 70). Ultimately, he found all of the original bank statements except for approximately ten statements, which were provided in copy form some time after receipt of the copies from Citibank. However, Mrs. Shah testified at trial that the bank records were located in the basement when, she looked for them in or about June 2007, and they were all located in two filing cabinets. (9/27/07 Tr., pp. 183-185). The Debtor's accountant testified that when the Debtor or Mrs. Shah came to them to prepare tax returns, he accepted the information and documents provided to him by the Shahs and returned all documents and papers with the prepared tax returns. (9/27/07 Tr., p. 208).
Based on the bank documents produced by the Debtor, the Debtor was an owner or joint owner of, or a signatory on, the following bank accounts for the six years prior to the Petition Date:
i) Citibank Checking Account no. xxxxx456 (joint checking account with Dipti Shah). This account was closed in July 2002;
ii) Citibank Checking Account no. xxxxx134 ("Citi Joint Checking Account") (joint checking account with Dipti Shah);
iii) Citibank High Yield Money Market Account no. xxxxx229 ("HYMMA") (joint account with Dipti Shah);
iv) Citibank Checking Plus Account no. xxxxx134 ("Checking Plus Account") (credit line linked to the Citibank Joint Checking Account);
v) 1 State Account held with Citibank;
vi) GBD Account held with Citibank;
vii) Citibank Home Equity Line of Credit Account no. xxxxx094 ("HLOC") active from November, 2005 to the Petition Date;
viii) Citibank Home Equity Line of Credit Account no. xxxx076, which was paid off in full in November, 2005; and
*32 ix) Astoria. Federal Checking Account no. xxxxxxx750 (joint account with Dipti Shah) ("Astoria Account").
With the exception of the Astoria Account, all of the bank accounts listed above were linked to facilitate electronic transfers of funds from one account to the other.
DISCUSSION
In general, the grant of a discharge is the "cornerstone of the debtor's `fresh start' in bankruptcy. It enables the debtor to begin his post-bankruptcy life with a clean slate vis-a-vis his creditors.' Such relief, however, is a privilege not a right and should inure only to the benefit of the honest Debtor." In re Gangemi, 291 B.R. 242, 245-46 (E.D.N.Y.2003) (citing In re Pimpinella, 133 B.R. 694, 697 (Bankr.E.D.N.Y.1991)) (internal citations omitted). Given the importance of the discharge in reordering a debtor's affairs, section 727 of the Bankruptcy Code, which provides grounds for the denial of a debtor's discharge, must be strictly construed against the party objecting to the debtor's discharge and liberally in favor of the debtor. In re Chalasani 92 F.3d 1300, 1310 (2d Cir.1996). Keeping these fundamental concepts in mind, the Court turns to the two counts of the Plaintiffs' complaint under § 727 of the Bankruptcy Code.
1. Concealment of Books and Records and Failure to Keep Adequate Books and Records § 727(a)(3)
In the first cause of action, the Plaintiffs seek to bar the Debtor's discharge pursuant to 11 U.S.C. § 727(a)(3). This section of the Bankruptcy Code provides that the Court shall grant the debtor a discharge, unless the debtor has "concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor's financial condition might be ascertained, unless such act or failure to act was justified under all of the circumstances of the case." (West 2007). The purpose behind this section is to "insure that the trustee and the creditors receive sufficient information to enable them to trace the debtor's financial history, to ascertain the debtor's financial condition, and to reconstruct the debtor's business transactions." State Bank of India v. Sethi (In re Sethi), 250 B.R. 831, 837 (Bankr.E.D.N.Y.2000) ("In re Sethi") (citations omitted); see also In re Underhill, 82 F.2d 258, 260 (2d Cir.1936), cert, denied, 299 U.S. 546, 57 S. Ct. 9, 81 L. Ed. 402 (1936). The records do not have to be complete and in perfect order, but the debtor must have available written evidence to determine the debtor's present financial condition and his recent past business transactions. In re Sethi, 250 B.R. at 838. The plaintiff must have sufficient evidence to sustain the cause of action by a preponderance of evidence. Nisselson v. Wolfson (In re Wolfson), 139 B.R. 279, 285 (Bankr.S.D.N.Y.1992), aff'd, 152 B.R. 830 (S.D.N.Y.1993) ("In re Wolfson").
Once a plaintiff has established a prima facie case that the debtor concealed, destroyed, or failed to keep material records, the burden of proof shifts to the defendant to furnish credible rebuttal evidence that such act or failure to keep the necessary records was justified under the circumstances. In re Sethi 250 B.R. at 838, 839 (citing In re Wolfson, 139 B.R. at 285). It is not sufficient for the debtor to supplement the missing documentary information through oral testimony. In re Sethi 250 B.R. at 839 (citations omitted).
Although the plaintiff is charged with proving the inadequacy of the debtor's books and records, the debtor is obligated to produce the records in the first *33 place. In re Sethi, 250 B.R. at 838. "The creditors and the court need not be required to guess what actually occurred because such speculations do not serve as an adequate substitute for credible proof," State Bank of India, New York Branch v. Chacra (In re Chacra), 138 B.R. 397, 401 (Bankr.S.D.N.Y.1992). Furthermore, intent to conceal a debtor's financial condition is not a required element to support an objection to discharge under § 727(a)(3). Id.
In determining whether a debtor's financial record-keeping is adequate, courts have considered the following factors:
i) whether the debtor was engaged in business, and if so, the complexity and volume of the business;
ii) the amount of the debtor's obligations;
iii) whether the debtor's failure to keep or preserve books and records was due to the debtor's fault;
iv) the debtor's education, business experience and sophistication;
v) the customary business practices for record keeping in the debtor's type of business;
vi) the degree of accuracy disclosed by the debtor's existing books and records;
vii) the extent of any egregious conduct on the debtor's part; and viii) the debtor's courtroom demeanor.
In re Kowalski, 316 B.R. 596, 602 (Bankr. E.D.N.Y.2004) (citing Krohn v. Frommann (In re Frommann), 153 B.R. 113, 117 (Bankr.E.D.N.Y.1993)).
This Debtor has had some college education and was an entrepreneur in several businesses. The matters before this Court are not complex. Having created several corporations, the Debtor must have known or been counseled regarding his duties as a corporate shareholder and officer. Based on the record before the Court, the Plaintiffs have established a prima facie case that the Debtor has concealed or failed to keep recorded information from which the Debtor's financial condition or business transactions can be determined. The Debtor's records for GBD and 1 State do not adequately set forth the income and expenses of these two entities. The Debtor concedes that he has no tax returns for GBD. The Debtor's explanation for failing, to file tax returns for GBD was that he asked the Accountants to prepare the tax returns, and he was not sure if they were ever prepared. (9/17/07 Tr., p. 15). According to the Accountants, no returns were prepared for GBD because the Debtor never provided sufficient information to the Accountants to properly prepare the returns. (9/27/07 Tr., p. 220). There are no general ledgers for either GBD or 1 State.
Because the Debtor did not file tax returns for GBD, the only documents available regarding GBD's finances are the bank records produced by the Debtor and the Debtor's individual tax returns for the relevant years. Bank statements and canceled checks have been produced, but the Debtor did not file individual tax returns for 2002, the year GBD was formed. The bank statements for the GBD Account do support the Debtor's assertion that GBD derived a substantial amount of funds from infusions from the Debtor's home equity lines of credit. The Debtor testified that he used funds from his home equity lines of credit or refinances to fund GBD's operations because GBD never generated enough income to cover its expenses. However, the bank statements also reflect that in 2003, over $12,100.00 was transferred from the GBD Account into the Citi Joint Checking Account. There is no explanation for these transfers out of the GBD Account, which do not appear to have *34 any business purpose. In 2004, 2005 and 2006, the GBD Account reflects numerous payments to American Express and Mobile. (Trial Ex. 31). The Debtor testified that he was not sure if GBD had an American Express Account, and he testified that funds from the GBD Account may have been used to pay personal expenses such as cell phone bills. (9/17/07 Tr., p. 47).
In 2006, well after GBD was active based on the Debtor's testimony, the bank records reflect that over $1,500.00 was transferred from the 1State Account into the GBD Account. Although it is not a significant sum of money, there is no explanation for the transfer of funds from 1State to GBD, which did not engage in similar businesses. In addition, there is no explanation for the withdrawals from and deposits into the GBD Account within one month of the Petition Date. This activity in the GBD Account belies the Debtor's explanation that GBD was not active since early 2004.
Without an understanding of why payments and transfers were made into and out of the GBD Account, an outsider cannot properly ascertain the Debtor's overall financial condition. The Debtor even admits in his post-trial submissions that it is impossible to determine which debts were being paid by some of these transfers. In sum, the bank records and other documents produced by the Debtor do not provide the Court with any means of determining crucial information regarding the operations of GBD.
The transactions reflected in the 1 State Account are equally unclear. From June 2005 through December 2005, the 1State Account reflects transfers into this account in the" total amount of $1,900.00 "via cbusol." (Trial Ex. 30). These transfers into the 1State Account cannot be traced to any of the accounts disclosed by the Debtor, nor is there any indication in the bank statements what "via cbusol" stands for.
The bank transactions for 1State in 2006 also raise questions which the Debtor did not answer to the satisfaction of the Court. The Debtor testified that he terminated his relationship with Allstate in February, 2006. Therefore, the 1State Account should reflect a winding down of its affairs, with a decrease in withdrawals and transfers. However, in 2006, a total of $2,500.00 was transferred from the 1 State Account into the Citi Joint Checking Account for no apparent business reason. (Trial Ex. 23, 30). The 1State Account also reflects withdrawals of $1,255.15 and deposits and credits in the amount of $1,179.30 for the time period from May 18, 2006 through June 19, 2006, when the Debtor testified that 1State was conducting no business. The 1State Account also reflects payment to a landscaper in May, 2006. (Trial Ex. 30). The payment was made over three months after 1State surrendered its lease with WMS Realty, Inc., and the Debtor was unable to explain why 1State would be making such payment. (9/17/07 Tr., p. 47). The tax returns for 1State do not shed any more light on IState's financial condition since there are no records annexed to the returns to reflect the alleged business expenses taken by 1 State.
The Debtor, who had engaged in running his own businesses prior to the formation of GBD and 1State and has a certain degree of business acumen, did not maintain ledgers or other corporate business records for these entities. This failure to maintain any records precludes the Court from determining the true income and expenses of the Debtor's businesses. The Debtor relies on his belief that because he produced so many bank records and tax returns, he cannot be charged with failing to maintain books and records from *35 which his financial condition can be determined. However, the documents produced by the Debtor must be more than merely voluminous. They must assist the Court and the creditors in determining what the Debtor's financial condition was as of the Petition Date, and for the recent period prior to the Petition Date. See In re Buzzelli 246 B.R. 75, 102-105 (Bankr.W.D.Pa. 2000) (The debtor's failure to maintain more than bank statements and canceled checks to account for business income and expenses was insufficient to withstand an action under § 727(a)(3)).
The Debtor's financial condition does not become any more clear when reviewing his personal bank records and his tax returns. The most glaring discrepancy as to the Debtor's financial affairs arises from the year 2004. During this year, the Debtor and his spouse received over $106,000.00 in earned income (as reflected in his tax returns) and received over $90,000.00 (net after repayment of prior loans) from the refinances of the Residence, for a total of over $196,000.00. The Debtor's bank records do not adequately explain how these funds were used by the Debtor and his family. The bank records do not reflect any large or extraordinary expenses incurred during 2004, such as a home remodeling or a medical emergency. Beyond stating that all of the Debtor's income went towards ordinary living expenses, the Debtor has no explanation for the use of these funds. It is not enough to merely state that these funds went towards the Debtor's living expenses for himself and his family. The Debtor's documents do not support this explanation.
The Debtor's personal bank records also raise serious issues which were not adequately explained by the Debtor at the trial. The Citi Joint Checking Account, which was the checking account primarily used by the Debtor and Mrs. Shah, reflects substantial deposits from and transfers into a linked account called a "PMMA." According to the Citigroup website, these initials stand for a "Premiere Money Market Account." The deposits from the PMMA into the Citi Joint Checking Account amounted to $13,100.00 in 2003, $24,690.00 in 2004, $2,675.00 in 2005 and $613.00 in 2006. The last pre-petition deposit from the PMMA into the Citi Joint Checking Account occurred on July 3, 2006, one week prior to the Petition Date. The Citi Joint Checking Account also reflects substantial transfers of funds from the Citi Joint Checking Account into the PMMA Account. In 2004 alone, the Debtor transferred approximately $19,775.00 into the PMMA Account. None of the bank records provided by the Debtor are described as Premiere Money Market Accounts, and none of the transfers into the Citi Joint Checking Account which are described as coming from the PMMA account correspond to any of the withdrawals or transfers from the other bank accounts disclosed by the Debtor. The Debtor never listed any money market account in his Schedules or in his Statement of Financial Affairs.
Despite the fact that the Debtor never disclosed the existence of a premiere money market account, it appears that the Debtor had a money market account which he either closed just prior to the Petition Date or which remained open post-petition. When questioned about the reference to savings in Schedule J at the trial, the Debtor stated that he was not sure what this meant, but he may have had "minuscule amounts" of savings at the time. (9/17/07 Tr., pp. 83-85). The Debtor also pointedly denied having any bank accounts which were not disclosed to the Plaintiff in discovery. (9/20/07 Tr., p. 78). Based on the documents produced and the Debtor's testimony, the Court and the creditors can only speculate about this premiere money *36 market account. As the Bankruptcy Court for the Southern District of New York noted in In re Chachra, the debtor has the initial obligation to produce all records from which his financial condition might be ascertained. 138 B.R. at 401. The fact that the Court and the creditors must resort to guessing about this undisclosed money market account and the lack of evidence as to what happened to the Debtor's funds during the year 2004 precludes the Debtor from obtaining a discharge pursuant to § 727(a)(3).
A review of the bank statements for the HELOC also contains information which raises questions regarding the Debtor's lack of candor with the Court and his creditors. The Debtor testified that he was using the funds from the HELOC to cover his living expenses because he was unemployed as of February, 2006. If that were the case, it would be reasonable to expect the Debtor to have withdrawn funds from the HELOC for deposit into the Citi Joint Checking Account to cover the day to day expenses of the Debtor and his family. A review of the HELOC does not support this assumption. From January 6, 2006 to the Petition Date, a total of $47,800 was withdrawn from the HELOC in substantial increments which were not deposited into another account disclosed by the Debtor or specifically used for ordinary living expenses. (Trial Ex. 32). The most substantial withdrawal in the amount of $37,500 took place on January 18, 2006, and there is no indication from the Debtor's records how these funds were used. It is certain, however, that these funds were not re-deposited into another listed account or used for day to day living expenses.
The information contained in the HLOC bank statements also raises serious issues regarding the Debtor's truthfulness in listing his bank accounts. The HELOC bank statements reflect that on February 28, 2006 and on March 30, 2006, funds were used to make payments to the HELOC via automatic transfer, with the notation that the funds came "from your checking account no. xxxxx020 from Citibank fsb in accordance with your Agreement." (Trial Ex. 32). This checking account number does not correspond to any of the bank accounts produced by the Debtor, yet it is linked to the HELOC to permit automatic debits to take place. There is no explanation for this checking account in any of the records produced by the Debtor, nor are there any documents regarding an agreement entered into between the Debtor and Citibank to permit the automatic transfer of funds from this account to the HELOC on a monthly basis.
The Debtor was not specifically questioned about this mystery checking account maintained at Citibank. However, when questioned at the trial, the Debtor stated that he had never deposited any funds from a home equity line of credit into an account other than the Citi Joint Account, the Astoria Account, the GBD Account or the 1State Account. (9/20/07 Tr., p. 78). The only conclusion which can be drawn from these facts is that the Debtor has an interest in another checking or money market account he has not listed in his Schedules or Statement of Financial Affairs.[3]
*37 The Debtor also failed to produce the agreement between Citibank and the Debtor which authorized Citibank to transfer funds from the undisclosed bank account to the HELOC on a monthly basis. The Court and the creditors are left to guess at the facts, which is a woefully inadequate substitute for the truth.
The Debtor's delay in producing the requested documents, while not a dispositive factor, also weighs in favor of denying the Debtor's discharge. See In re French, 499 F.3d 345, 356 (4th Cir.2007) (A debtor's delay in producing requested documents can be taken into account when determining whether to deny the debtor's discharge under § 727(a)(3)).
The Debtor failed to produce numerous documents requested by the Plaintiffs until the Plaintiffs filed a motion to compel their production. In addition, the Debtor's purported reason for failing to timely produce the documents, that he had to search high and low for the records, was belied by his wife's testimony. Dipti Shah testified that the bank records were kept in the basement, within the confines of two filing cabinets. Based on the facts of this case, it appears that the Debtor had no justifiable reason for failing to timely produce the majority of the bank records from 2000 to 2004, as well as the bank records for GBD.
In sum, the Debtor has failed to justify his delay in producing documents, and his deficient record keeping for his businesses and for his personal finances. The Debtor cannot rely on his belief that producing volumes of bank records is sufficient, where the bank records themselves raise as many questions about the Debtor's finances as they answer, and fail to shed light on the expenses and income of 1 State and GBD. Furthermore, the bank records produced strongly indicate that the Debtor has not disclosed all bank accounts and financial agreements for the six years prior to the Petition Date. Therefore, the Court grants judgment in favor of the Plaintiffs pursuant to § 727(a)(3) of the Bankruptcy Code.
2. The Debtor's False Oaths and Accounts § 727(a)(4)(A)
The second cause of action asserted by the Plaintiffs is that the Debtor's discharge should be denied under § 727(a)(4)(A) of the Bankruptcy Code. This section provides in pertinent part that "(a) the court shall grant the debtor a discharge unless ... (4) the debtor knowingly and fraudulently, in or in connection with the case (A) made a false oath or account." (West 2007). "The purpose of section 727(a)(4)(A) is to insure that adequate information is available to those interested in the administration of the bankruptcy estate without the need of examination or investigation to determine whether the information provided is true.... Successful administration of the bankruptcy law depends on the debtor's full disclosure." In re Dubrowsky, 244 B.R. 560, 572 (E.D.N.Y.2000).
To sustain an objection to discharge under this section, the plaintiff "must prove the following by a preponderance of the evidence: (1) the debtor made a statement under oath; (2) the statement was false; (3) the debtor knew the statement was false; (4) the debtor made the statement with fraudulent intent; and (5) the statement related materially to the bankruptcy case." Id. Once the objecting creditor meets its burden of proof and has produced persuasive evidence of a false statement, the burden shifts to the debtor to come forward with evidence to prove that it was not an intentional misrepresentation or provide some other credible explanation. See, e.g., In re Murray, 249 B.R. 223, 228 (E.D.N.Y.2000).
*38 A false oath may consist of a false statement or omission in a debtor's schedules or a false statement made by a debtor at an examination during the course of the proceedings. In re Abramov, 329 B.R. 125 (Bankr.E.D.N.Y.2005). In this case, the Debtor made false statements in the Schedules, the Statement of Financial Affairs and at trial. The Debtor failed to disclose in his Schedules his ownership interest in GBD, which failure was not cured until, several months after the filing of the original Schedules. The Debtor also failed to disclose in his Schedules that the obligations to Citibank and Countrywide were joint obligations of the Debtor and his wife. The Debtor failed to disclose in his Schedules that the Debtor's wife was a co-debtor with respect to the obligations to American Express Blue. (Trial Ex. 11). The Debtor failed to accurately describe the Debtor's expenses with respect to the 2000 Chevrolet Suburban, falsely identifying in Schedule J and Amended Schedule J a monthly expense for this vehicle. The Debtor did so despite having no intention of keeping the vehicle or reaffirming the obligation secured by a lien on the vehicle. According to the Debtor's Statement of Intention filed with the Petition, the Debtor indicated he would surrender the vehicle. (Trial Ex. 11).
The Debtor also failed to disclose in his Statement of Financial Affairs the payments he made for sums of greater than $600.00 to various creditors within the 90 days prior to the Petition Date. (9/17/07 Tr., pp. 17-18; and 9/27/07 Tr., pp. 99-101) The Debtor failed to disclose in the appropriate place on the Statement of Financial Affairs the receipt of income from Allstate in 2006. The Debtor also failed to disclose in the Schedules or Statement of Financial Affairs and at trial the existence of the premiere money market account referred to in the Citi Joint Checking Account, and the checking account referred to in the bank statements for the HELOC.
A debtor must know that these statements are false, and must make the statements with fraudulent intent in order for a plaintiff to sustain his or her burden of proof. Even though actual intent rather than constructive intent must be established, "a multitude of misstatements and omissions of fact [can demonstrate] a pattern of reckless disregard for the truth and intent of concealing information from the Court and its creditors." In re Sapru, 127 B.R. 306, 317 (Bkrtcy.E.D.N.Y.1991). See also In re Diorio, 407 F.2d 1330, 1331 (2d Cir.1969) (Reckless indifference to the truth is sufficient to sustain an action for fraud.).
The Debtor's Schedules and Statement of Financial Affairs are literally peppered with material misstatements and omissions. The Debtor did have various explanations for some of these omissions, which are insufficient. The Debtor stated that he corrected his Statement of Financial Affairs to disclose the existence of GBD. The Debtor also testified that he did not understand that he had to disclose all payments with an aggregate value of over $600.00 made to creditors within 90 days of the filing of the Petition. (9/27/07 Tr., p. 100). The Debtor had no cogent explanation for his failure to list his wife as a coobligor on various debts, and the Debtor claims he did list his income from Allstate during 2006, just not in the correct place in the Statement of Financial Affairs. Likewise, the Debtor states that he listed his wife's interest in the Residence correctly, just not in the correct place in the Schedules.
The Debtor has clearly exhibited a reckless indifference to the truth with respect to the information contained in the Schedules and Statement of Financial Affairs. These omissions and misstatements *39 go beyond mere carelessness, and provide sufficient' grounds for finding that the Debtor acted with fraudulent intent. The fact that the Debtor did correct his failure to list GBD in the Statement of Financial Affairs does not absolve the Debtor. While corrective disclosure before an objection to discharge is filed may be indicative of innocent intent, the effect of a false statement is not cured by correction in a subsequently filed schedule. In re Tabibian, 289 F,2d 793, 797 (2d Cir.1961); see also In re Ingle, 70 B.R. 979, 984 (Bkrtcy. E.D.N.C.1987) ("The fact that the property in question is included in the debtor's amended petition does not excuse its original omission."). Based on the multitude of misstatements in the Schedules and Statement of Financial Affairs, the Court does not find that the Debtor's ultimate disclosure of GBD suggests the Debtor's innocent intent. Furthermore, the Debtor never provided any information regarding the premiere money market account, nor did the Debtor provide any information regarding the checking account from which payments to the HELOC were being deducted in the last few months prior to the Petition Date.
The Debtor's false statements related materially to his bankruptcy estate. A matter is material if it bears a relationship to the debtor's "business transactions or estate which would lead to the discovery of assets, business dealings or existence or disposition of property." In re Murray, 249 B.R. at 228. While materiality will not be found where the omissions are inconsequential or technical, there is no requirement that the creditors be prejudiced by the omissions. Id. In addition, lying about worthless assets is material because the misstatements "relate to the Debtor's assets and business dealings, and taken as a whole are misleading to both the court and the creditors as to the nature and extent of the Debtor's business transactions and estate." In re Sapru, 127 B.R. at 306. The failure to disclose the existence of GBD is material, as is the failure to accurately set forth his monthly expenses and his failure to disclose all of his bank accounts and financial agreements. Each of these facts taken individually may not rise to the level of materiality, but cumulatively, they show a pattern of deceit. In sum, the Court finds that the Plaintiffs have established each element of this cause of action by a preponderance of the evidence. The Debtor has failed to provide credible explanations for the Debtor's erroneous and misleading statements, which indicates a dishonest debtor rather than an honest debtor who would be entitled to a fresh start. Based on these factors, and the totality of circumstances, the Court finds that the Debtor's discharge shall be denied pursuant to § 727(a)(4)(A) of the Bankruptcy Code.
CONCLUSION
1. The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334(a).
2. This is a core proceeding under 28 U.S.C. § 157(b)(2)(J).
3. For the reasons set forth above, the Debtor's discharge is denied under §§ 727(a)(3) and (a)(4)(A) of the Bankruptcy Code.
An order shall be entered simultaneously with this memorandum decision.
NOTES
[1] The Plaintiffs withdrew their cause of action seeking to have their judgment debt against the Debtor deemed non-dischargeable under 11 U.S.C. § 523(a)(2) prior to the conclusion of the trial.
[2] There are no corporate documents, other than requests by GBD for extensions of time to file corporate tax returns, to substantiate the Debtor's claim that GBD was a subchapter C corporation.
[3] The bank statements for the HELOC reflect automatic transfers into the HELOC on April 28, 2006 and May 30, 2006, with the same notation that the funds were transferred from "your checking account from Citibank fsb in accordance with your Agreement", but there is no reference to any bank account number. These transfers into the HELOC do not correspond with any withdrawals or transfers out of the bank accounts disclosed by the Debtor. The Court concludes that these transfers came from an undisclosed account. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545073/ | 216 B.R. 942 (1997)
In re CELEBRITY DUPLICATING SERVICES, INC., Debtor.
Marcy J.K. TIFFANY, United States Trustee, Appellant,
v.
CELEBRITY DUPLICATING SERVICES, INC., Appellee.
No. CV 97-4726 DT, Bankruptcy No. LA 91-71753KM.
United States District Court, C.D. California.
November 17, 1997.
*943 Marcy J.K. Tiffany, U.S. Trustee, Los Angeles, CA, Pro se.
Leon L. Vickman, Leon L. Vickman Law Offices, Encino, CA, for Appellee.
ORDER AFFIRMING THE BANKRUPTCY COURT'S ORDER ON U.S. TRUSTEE'S MOTION TO DISMISS OR CONVERT CASE.
TEVRIZIAN, District Judge.
I. Background
Celebrity Duplicating Services, Inc. ("Celebrity" or "Debtor") voluntarily filed for relief under the reorganization provisions of chapter 11 of the Bankruptcy Code on April 12, 1991. A Plan of Reorganization was confirmed by the bankruptcy court on July 13, 1995.
On or about February 26, 1997, Debtor filed a Motion for Final Decree Closing Chapter 11 Case. In that Motion, Debtor objected to the payment of post-confirmation quarterly fees to the United States Trustee on the grounds that the Plan was confirmed prior to the effective date of certain amendments to 28 U.S.C. § 1930(a). The United States Trustee filed an objection to the issuance of a final decree on the grounds that Celebrity's statutory quarterly fees were delinquent.
On April 18, 1997, the United States Trustee filed a Motion to (1) Dismiss or Convert Case pursuant to 11 U.S.C. § 1112(b) for Failure to Pay U.S. Trustee Quarterly Fees (2) Fix Administrative Payment; and (3) to Order Payment. Celebrity objected to the United States Trustee's Motion, asserting once again that no post-confirmation fees were due because the case was confirmed prior to the amendment of section 1930(a). Celebrity also argued in the alternative that if post-confirmation fees were due, such fees should be due only in the minimum amount, without regard to disbursements.
On June 4, 1997, the bankruptcy court ruled that Celebrity must pay post-confirmation quarterly fees, and limited the amount of fees to the minimum amount under the statute. The bankruptcy court did not specify its findings of fact or conclusions of law supporting that decision. See June 4, 1997 Order of Bankruptcy Court.
On June 10, 1997, the United States Trustee filed in the bankruptcy court its Notice of Appeal and Objection to Hearing Before the Bankruptcy Appellate Panel.
On July 8, 1997, the United States Trustee filed a Notice of Related Cases, requesting that the present bankruptcy appeal, originally scheduled for hearing before Judge James M. Ideman, be transferred to this Court, in which the related and earlier filed case of In re Celebrity Home Entertainment, Inc., case number CV 97-4725 DT, was pending. Pursuant to that Notice of Related Case, the present action was transferred to this Court on July 24, 1997.
*944 II. Discussion
A. Standard of Review
Decisions of the bankruptcy court may be appealed to the district court pursuant to 28 U.S.C. § 158(a). On appeal, this Court employs a de novo standard of review with respect to issues of law decided by the bankruptcy court. In re Kashani, 190 B.R. 875, 881 (9th Cir. BAP 1995).
B. The Bankruptcy Court Did Not Err In Its Interpretation of Section 1930(a)(6)
Celebrity has not appealed from the bankruptcy court's order directing Celebrity to pay post-petition fees in the amount of $250.00 per quarter. Hence, the sole issue presented in this appeal is whether the United States Trustee is entitled to fees in excess of the $250.00 per month awarded by the bankruptcy court. For the reasons set forth herein, this Court finds that the bankruptcy court properly applied section 1930(a)(6) in the present case.
1. The 1996 Amendment to Section 1930 Extended the Fee Requirements into the Post-Petition Period
Prior to its amendment in 1996, 28 U.S.C. § 1930(a)(6) read as follows:
In addition to the filing fee paid to the clerk, a quarterly fee shall be paid to the United States trustee, for deposit in the Treasury, in each case under chapter 11 of title 11 for each quarter (including any fraction thereof) until a plan is confirmed or the case is converted or dismissed, whichever occurs first.
28 U.S.C. § 1930(a)(6) (West 1994) (emphasis added). The 1996 amendment deleted the phrase "a plan is confirmed or." 28 U.S.C. § 1930(a)(6) (West Supp.1997). Congress subsequently clarified the applicability of section 1930 in section 109(d) of Public Law 104-208, 110 Stat. 3009: "notwithstanding any other provision of law, the fees under 28 U.S.C. § 1930(a)(6) shall accrue and be payable from and after January 27, 1996, in all cases (including without limitation, any cases pending as of that date), regardless of the confirmation status of their plans. . . ."
The fees payable under section 1930(a)(6) are calculated based upon the total "disbursements" made in the underlying chapter 11 case. Of particular importance to the instant case is the fact that Congress did not include a provision in the 1996 amendments that defined the term "disbursement."
2. This Court Must Apply the Definition of "Disbursement" Set Forth By the Ninth Circuit in Victoria Farms
As the Ninth Circuit recognized in St. Angelo v. Victoria Farms, Inc., 38 F.3d 1525, 1534 (9th Cir.1994), the term "disbursements" is not defined anywhere in section 1930(a)(6) or in the legislative history of the statute. Nevertheless, in interpreting section 1930, the Victoria Farms court stated that "Congress clearly intended `disbursements' to include all payments from the bankruptcy estate." Id.
Since a bankruptcy estate ceases to exist upon confirmation of a plan, payments made by a reorganized debtor are outside the scope of section 1930 "disbursements" as defined in Victoria Farms. Although the Ninth Circuit has yet to address whether the Victoria Farms definition of disbursements remains good law in the wake of the 1996 amendment to section 1930, the lower courts have split on that issue. Some courts have held that post-confirmation fees should include all disbursements made by the reorganized debtors. See, e.g., In re Sedro-Woolley Lumber Co., 209 B.R. 987, 988 (Bankr. W.D.Wash.1997); In re Corporate Business Prods., 209 B.R. 951, 955 (Bankr.C.D.Cal. 1997) ("Given the fact payments from both the bankruptcy estate and from reorganized debtors stem from the same `case,' it is likely Congress intended both to be included in the calculations of quarterly fees."). Other courts have held that "[b]ecause Congress did not make its intent clear, `disbursement' remains defined as coming from the bankruptcy estate." In re Maruko Inc., 206 B.R. 225, 229 (Bankr.S.D.Cal.1997).
This Court finds the Maruko rationale compelling. It is well settled that Congress is charged with knowing judicially created law when it amends statutes, and that such *945 judicially created law can only be displaced by clearly stated Congressional intent. See Midlantic Nat'l Bank v. New Jersey Dept. of Envtl. Protection, 474 U.S. 494, 501, 106 S. Ct. 755, 759-60, 88 L. Ed. 2d 859 (1986). This Court finds no such clearly stated intent in the amendment to section 1930. Hence, the Victoria Farms definition of disbursements remains applicable in the context of section 1930(a)(6) fee calculation.
The Court recognizes that Congress intended for the 1996 amendments to section 1930 to increase fee revenues by extending the fee requirements into the post-confirmation period. See H.R.Rep. No. 104-1096, 104th Cong., 1st Sess. at 16-17 (1995). The interpretation of section 1930(a)(6) used by the bankruptcy court in the present case furthers this goal: Celebrity was ordered by the bankruptcy court to pay the United States Trustee $750.00 in post-confirmation fees.
This Court notes that under the Victoria Farms definition of "disbursements," no reorganized debtor would ever be required to pay more than the minimum amount of quarterly fees, since under Victoria Farms the bankruptcy estate is by definition incapable of making disbursements after confirmation of a reorganization plan. However, bearing in mind the fact that Congress failed in the 1996 amendment to express a specific intent to abrogate the Victoria Farms definition of disbursements, this Court is bound by stare decisis and the plain language of 28 U.S.C. § 1930(a)(6) to affirm the order of the bankruptcy court. A change in this law must come from further amendment of the statute, or a decision by the Ninth Circuit to clarify the application of Victoria Farms. Both of these events are beyond the jurisdiction of this Court.
Therefore, for the foregoing reasons, the June 4 Order of the bankruptcy court ordering Celebrity to pay fees in the minimum statutory amount of $250.00 per quarter for the third and fourth quarters of 1996 and the first quarter of 1997 is AFFIRMED. This case is remanded to the bankruptcy court for further proceedings consistent with this opinion.
IT IS SO ORDERED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544400/ | 132 A.2d 831 (1957)
Lillian R. GIRARD
v.
UNITED STATES RUBBER COMPANY.
Eq. No. 2501.
Supreme Court of Rhode Island.
June 18, 1957.
Michaelson & Stanzler, Milton Stanzler, Providence, for petitioner.
Ambrose W. Carroll, Providence for respondent.
ROBERTS, Justice.
This is an employee's original petition for compensation and medical expenses under the workmen's compensation act, general laws 1938, chapter 300, as amended by public laws 1954, chap. 3297. The case was heard by a trial commissioner, who on May 5, 1955 entered a decree wherein it was found that petitioner had suffered an injury to her back which resulted in coccygodynia and injuries to her head in the left occipital region which developed into an occipital neuralgia. It was also found that she had been totally disabled from July 31, 1954 to December 17, 1954.
The respondent took an appeal from this decree to the full commission, and on December 2, 1955 a decree was entered affirming the decree of the trial commissioner. The case is here on the respondent's appeal from that decree. The respondent was allowed to prosecute its appeal after complying with the provisions of P.L. 1954, chap. 3297, art. III, secs. 4 and 7. See *832 Girard v. United States Rubber Co., R.I., 127 A.2d 242.
The respondent's appeal is based primarily on the contention that the trial commissioner erred in granting the employee's petition, which was filed November 27, 1954, because it had not been brought within two years after the cause of action arose as is required by the statute. The respondent contends that petitioner's compensable incapacity began at the time of the injury on February 11, 1952 and that under the case of Rosa v. George A. Fuller Co., 74 R.I. 215, 60 A.2d 150, the two-year period expired prior to November 27, 1954. It also urges that the decision and the decree are not supported by legal evidence of probative value and that certain evidence was improperly admitted or excluded.
The petitioner was injured on February 11, 1952. It appears that in the course of her employment it was her practice to sit on a chair while operating the machine to which she was assigned. It further appears that on that date the chair had been moved without her knowledge, and when she went to sit down she fell to the floor and sustained injuries to her back and head. It is not substantially disputed that petitioner did not complete her day's work on February 11 or that she did not work at all on the next day. She did not recall working on February 13, but on February 14 she worked at a temporary job, earning less money than her regular wage. On February 15 she resumed her regular employment. Thereafter petitioner took leaves of absence. The first of these extended from December 29, 1952 to February 3, 1953; another from May 22 to November 2, 1953; and on August 1, 1954 she began her annual two weeks' vacation. After the vacation had terminated, she took another leave of absence made retroactive to July 31, 1954. On December 17, 1954 she returned to work and has been working continuously since that date.
The question of whether the petition in the instant case was filed within the two-year period required by art. III, § 17, of the act depends upon the date on which the cause of action accrued to the employee by reason of the onset of compensable incapacity. In the Rosa case, supra, we held that the statutory period of limitation for the filing of petitions began to run when a cause of action against the employer accrued to the employee and that such cause of action accrues when the employee has, by reason of the injury, been incapacitated from earning full wages for at least three days.
The respondent argues vigorously that the commission misconceived the law applicable to the establishment of an employee's right to be compensated for incapacity when it failed to find that petitioner was disabled within the meaning of art. II, § 4, of the act prior to November 27, 1952, or more than two years before she filed her petition on November 27, 1954. Section 4 provides that the right to be paid compensation for incapacity accrues only when the employee has been incapacitated "for a period of at least 3 days from earning full wages." It is respondent's contention that the three days need not run consecutively. In our opinion this concept of the law is incorrect. The three days contemplated by the provision cited above is a period of three consecutive days, on each of which the employee is by reason of his injury unable to earn wages, and that period does not include the day of the injury.
In this case the petition was filed on November 27, 1954, and it appears from the record that the commission, in the decree appealed from, found that the compensable incapacity of petitioner began on July 31, 1954. If this finding as to the onset of compensable incapacity is conclusive, it is clear that the petition was filed within the time required by the statute, and it is well settled that the findings of the commission, if supported by legal evidence, are binding upon this court. Burns v. Rhode Island Tool Co., 79 R.I. 169, 85 A.2d 925.
*833 The respondent's further contentions concerning the absence of legal evidence of probative value and the improper admission and exclusion of evidence appear to have been intended to raise the question of whether this petitioner met the burden imposed upon her of proving her case by credible evidence of probative force. Cruso v. Yellow Cab Co. of Providence, 82 R.I. 158, 106 A.2d 734. This question bears directly upon the basic issue of whether the decree of the commission is supported by legal evidence and therefore binding on this court. For that reason we will examine the evidence to determine that issue.
The petitioner testified that after she fell on February 11, 1952, she suffered back pains and recurring headaches which increased in intensity, duration and frequency until in July 1954 she was compelled to stop working because of them. Early in August 1954 she consulted her personal physician Dr. J. Gerald Lamoureux concerning the headaches and was referred by him to Dr. Thomas L. Greason, a specialist in neurology and psychiatry. Doctor Greason examined her for the first time on August 16, 1954, more than two years after her fall. He referred petitioner to Dr. David J. LaFia, a neurosurgeon, who examined her on October 14, 1954 and several times thereafter.
At the hearing Dr. Greason was permitted to testify, over respondent's objection, to the history given him by petitioner relating to her fall and her condition between February 1952 and August 1954 as well as to the findings he made as a result of his examination of August 16, 1954. The doctor then testified that his diagnosis of petitioner's condition was "(1) * * * traumatic occipital neuralgia, left, (2) coccydynia, (3) psychoneurosis, anxiety, aggravated by the prolonged symptomatic distress." The respondent's motion to strike that testimony was denied. The doctor was then permitted to testify, over respondent's objection, that petitioner was disabled by reason of the traumatic occipital neuralgia and that this condition was consistent with the head injury which she told him she sustained on February 11, 1952.
Doctor Greason further testified, without objection from respondent, concerning a second examination of petitioner on September 20, 1954, stating that in his opinion she was disabled from doing her work when he examined her on August 16 and also on September 20 by reason of occipital neuralgia and psychoneurosis. Thereafter petitioner moved that two reports in writing prepared by Dr. Greason for submission to her personal physician, after each of the examinations above referred to, be admitted in evidence. The reports were so admitted without objection from respondent.
In our judgment there is evidence which supports the decision of the commission that petitioner's disability began on July 31, 1954. The testimony of petitioner and that of Dr. Greason, taken together, satisfy our rule concerning the conclusiveness on this court of findings of the commission which are supported by legal evidence.
There remains only the question of the competency of the medical evidence, which respondent raises by contending that it was improperly admitted; that the doctor was an examining and not an attending physician; that his examinations were remote from the injury in point of time; and that the history given him by petitioner contained self-serving statements.
Whatever might be the merit of these objections in the ordinary case, the fact is that in this case the written reports of Dr. Greason prepared for submission to petitioner's personal physician were admitted in evidence without objection on the part of respondent. These reports recite in substantial detail the history given the doctor by petitioner, his finding on examination, and his diagnosis. If the reports do not specifically recite his opinion that petitioner's disability resulted from the occipital neuralgia, the record reveals that when being *834 questioned concerning his examination of September 20, he testified, without objection by respondent, that she was disabled from work both on August 16 and September 20 by reason of traumatic occipital neuralgia.
The evidence to which we have made reference appears in the record and, in our opinion, constitutes legal evidence to support the decision of the commission that the compensable incapacity of petitioner began on July 31, 1954, and hence supports our holding that the commission did not err when they found that the petition in this case was filed within the period required by art. III, § 17, of the act. We are also of the opinion that petitioner has introduced credible evidence of probative force upon which the commission could find that she had discharged the burden of proof resting upon her. The respondent's other reasons of appeal have been examined by us and in the circumstances we find them to be without merit.
The respondent's appeal is denied and dismissed, the decree appealed from is affirmed, and the cause is remanded to the workmen's compensation commission.
FLYNN, C. J., not participating. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544414/ | 213 Md. 592 (1957)
132 A.2d 597
HARRIS
v.
HARRIS
[No. 209, October Term, 1956.]
Court of Appeals of Maryland.
Decided June 7, 1957.
Before COLLINS, HENDERSON, HAMMOND and PRESCOTT, JJ., and KINTNER, J., Associate Judge of the Second Judicial Circuit, specially assigned.
Submitted on brief by F. DeSales Mudd and Mudd & Mudd for the appellant.
*594 Submitted on brief by George W. Bowling for the appellee.
COLLINS, J., delivered the opinion of the Court.
This is an appeal from a decree ordering the respondent, Golon B. Harris, appellant, to pay his wife, Amelia L. Harris, complainant, appellee, alimony and support beginning on November 15, 1956.
The First Judicial District Court of the State of Nevada, having jurisdiction of the parties to this cause, by decree on January 19, 1942, divorced the appellant a vinculo matrimonii from the appellee and ordered him to pay her $100.00 per month alimony. The appellee later became a resident of the State of Florida where she still resides and has not remarried. The appellant, after his retirement from the Armed Forces, became a resident of Charles County, Maryland, where he still resides. He has remarried and has a child by his present wife. The appellant, by a subsequent motion addressed to the Nevada court, petitioned that court to strike out the previously ordered alimony payments. This motion was denied by that court on November 27, 1950. The appellee, by successive actions at law in the Circuit Court for Charles County, Maryland, had obtained three judgments against the appellant for alimony which had accrued and was in arrears under the Nevada decree. One judgment, dated February 21, 1949, was for $600.00; another, dated August 15, 1949, for $600.00; and the third, dated March 27, 1950, for $900.00. Two of these judgments had been unpaid at the time of the adjudication in the instant proceeding as unsatisfied obligations of record.
On January 8, 1953, the complainant filed a petition in the Circuit Court for Charles County in which she alleged the aforesaid decree of the Nevada court; that said decree had not been modified by said court; that the respondent had failed to comply with the terms of the aforesaid decree in the payment of alimony and was then in arrears in said payments in the amount of approximately $4,300.00 to and including December 15, 1952. Notwithstanding her repeated demands up to the time of the filing of the petition, she had received nothing from the respondent on account of said delinquent *595 payments. The last payment made by him was the sum of $700.00 to cover payments up to May 15, 1949. In the petition she asked that the respondent be adjudicated in contempt of court for his failure to comply with the aforesaid decree of the Nevada court, and be cited by an order of the Circuit Court for Charles County to appear and answer "and abide by such order and judgment as this Court may see fit to pass". After an order overruling a demurrer to that petition, an answer was filed by the respondent admitting the proceedings in the State of Nevada and alleging that since the Nevada proceedings he has made payments to the complainant from time to time commensurate with his income and her requirements and that she has waived or rescinded further demands under the Nevada decree. He further alleged that the Circuit Court for Charles County was without jurisdiction to adjudge him in contempt for failure to comply with the alleged decree of the Nevada court.
The chancellor filed an opinion in the case on September 13, 1955, before the decision of this Court in McCabe v. McCabe, 210 Md. 308, 123 A.2d 447, decided June 15, 1956. In the opinion in the instant case the chancellor held that the Maryland court could not enforce the Nevada decree by punishment by way of imprisonment. He was of opinion, however, that, although the complainant did not specifically ask for support in the decree, "* * * the relief sought is sufficiently broad to encompass the relief which should be granted without an amendment to the Complaint, even though there is no prayer asked for `such further relief as to the Court may seem just and proper'. This is true because what the Complainant is really asking is not the punishment of the Defendant but the obtaining of the support provided for her." He set the matter down for hearing for the purpose of receiving additional testimony relative to the amount which should be ordered paid by the respondent to his former wife. Testimony of the complainant was taken by deposition and filed in the case on January 5, 1956. The financial statement filed in the case by the respondent showed that he has an income from Army retirement, annuity and salary of more than $8,000.00 per year, but no property other than an automobile for which total payment had not been made.
*596 On November 3, 1956, after the McCabe case, supra, was decided, the chancellor filed a decree in which he recited the aforementioned decree of the Nevada court on January 19, 1942, requiring the respondent to pay the complainant $100.00 monthly as alimony and support. The decree also stated: "And, it also appearing that said decree had not been altered, changed, or modified, by the First Judicial Court of the State of Nevada, in and for the County of Ormsby, and this Court finding that the Defendant, Golon B. Harris, was in contempt of the First Judicial District Court of the State of Nevada, in and for the County of Ormsby, in that said Defendant had failed to make said monthly payments; and it further appearing from the testimony of the Plaintiff and Defendant that the sum previously awarded is consistent with the present needs of the Plaintiff, and that the Defendant is financially able at this time to pay the amount previously awarded," he ordered that the respondent pay the complainant $100.00 per month beginning on November 15, 1956, and costs.
On November 20, 1956, the respondent filed a petition to defer the alimony payments. No action was taken on that petition by the chancellor and on November 30, 1956, the respondent filed an appeal to this Court from the decree of November 3, 1956.
The respondent contends primarily that, because there was no specific prayer for general relief, the chancellor was without jurisdiction to pass the decree appealed from. He relies on General Equity Rule 7 of this Court, in effect when this proceeding was commenced and finally determined, which provided in part:
"All bills * * * shall contain simply a statement of the facts upon which the plaintiff asks relief, and, at his option, the facts which are intended to avoid an anticipated defense, and such averments as may be necessary, under the rules of Equity pleading, to entitle the plaintiff to relief, and the prayer for relief shall specify particularly the relief desired, and shall also contain the prayer for general relief."
*597 By Rule 370 a 3, Maryland Rules of Procedure, in effect since January 1, 1957, it is provided:
"A bill or petition shall also contain prayers specifying particularly the relief sought, which shall be separately numbered, and may also contain a general prayer for such other and further relief as the case may require."
Of course, where there is a prayer for general relief and the specific relief cannot be granted, relief may be granted under the general prayer suitable to the peculiar nature of the case, and when a court of equity has once rightly assumed jurisdiction it will retain its jurisdiction in order to settle all questions that might arise out of the subject in controversy and give complainants complete relief, even in those respects in which it would not have had jurisdiction originally, thereby preventing a number of conflicting proceedings concerning the same subject. McKeever v. Realty Corp., 183 Md. 216, 224, 37 A.2d 305, and cases there cited; Phillips Co. v. Md. Broadcasting Co., 184 Md. 187, 197, 198, 40 A.2d 298.
The respondent also relies on the following quotation from Miller's Equity Procedure, Section 100, pages 128 and 129:
"There should be a special prayer, or prayers, for the particular relief sought, followed by a prayer for general relief. The latter can never be safely omitted; because if the plaintiff in his special prayer should mistake the relief to which he is entitled, the court may yet, under the general prayer, afford him the relief to which he has a right, provided it is such relief as is agreeable to the case made by the bill. But if there is no prayer for general relief, and the special prayer cannot be granted, no other relief can be given and the bill must be dismissed unless an amendment of the prayer is allowed."
In Crain v. Barnes, 1 Md. Ch. 151, relied on by Miller, supra, the prayer asked that the plaintiff "may have such relief as equity may require." It was contended that this *598 prayer was insufficient standing by itself and unaccompanied by any special prayer to grant the relief given in the decree. It was there said that the object of all pleading is to give parties notice of the "ground of claim" and when that was done the object of the rules of pleading was obtained. It was there pointed out that the defendants in the case had notice by the bill of the relief sought against them.
In McCabe v. McCabe, supra, the parties lived in Maryland where two children were born to them. The husband subsequently procured an absolute divorce in Nevada where the court ordered the husband to pay the wife permanent alimony and support for the children. The wife continued to live in Maryland with the children, and the husband finally returned to Maryland. It was there asked by the wife that the Maryland court enforce the decree of the Nevada court. The wife alleged that the husband owed her $25,890.00 in accrued and unpaid alimony and support installments at the time the case was filed in Maryland. The bill asked that the Maryland court decree that $25,890.00 was then due the wife and that it adopt the Nevada decree as its own and enforce it as was customary under the laws of Maryland. A demurrer to the bill was sustained by the chancellor, who transferred the case to the law side of the court. This Court, in holding that the chancellor erred in sustaining the demurrer and transferring the case to the law side of the court, said at pages 317 and 318: "We need not and do not decide now the answer to the various problems that may arise in the enforcement in equity of foreign decrees for alimony and support. We decide only that in Maryland an equity court can enforce a decree of another state, both as to alimony accrued and to accrue, and may use for its enforcement the same equitable remedies and sanctions it could use to enforce a decree it had duly entered in the first instance, even as the Legislature has said it may use such remedies and sanctions to enforce orders of support under the Uniform Reciprocal Enforcement of Support Act, Code, 1951, Art. 89C, Sections 13 and 15." The respondent in his brief admits: "No attempt is made here to defend or to condone the apparent previous attitude of the appellant towards the payment of alimony to his former *599 wife, which this Court has definitely held to be a duty and not a debt. Safe Deposit & Trust Co. v. Robertson, 192 Md. 653 [65 A.2d 292]."
Under the McCabe case, supra, the Maryland court had the power to enforce the Nevada decree and use the same equitable remedies and sanctions to enforce it as if it were a Maryland decree. Although the specific relief sought here was punishment by way of imprisonment, the primary purpose of the bill was to obtain support for the wife. The respondent had notice of the claim of the complainant as in Crain v. Barnes, supra, where the prayer was for such relief as equity may require. We are of opinion that, under the prayer here, that the respondent be required to abide by such judgment as the equity court may see fit to pass, the chancellor had jurisdiction to order the payment of the alimony instead of punishment for contempt.
Although the decree stated that the respondent was in contempt of the Nevada court for failure to pay the back payments, no order was made by the chancellor as to the alimony which had accrued previous to November 15, 1956. The complainant in her brief so construes this order by the following statement: "In this particular case the Court made no order as to the alimony which had already accrued, but passed an order ordering the Defendant to pay to his wife the sum of One Hundred ($100.00) Dollars per month, based on the testimony which the Chancellor heard dealing with the necessities of the wife and the ability of the Appellant to pay." By so doing she cannot later contend that the decree of November 3, 1956, from which the appeal is taken, in any way made any order affecting past due alimony. We so hold. As the Maryland court had power to enforce the Nevada decree, the order that the respondent pay the complainant $100.00 per month, the exact amount as ordered in the Nevada decree, was simply an enforcement of that decree, permitted under the McCabe case, supra. The decree will be affirmed.
Decree affirmed, with costs. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544466/ | 133 F.2d 261 (1943)
UNITED STATES
v.
EVERSMAN.
No. 9197.
Circuit Court of Appeals, Sixth Circuit.
February 11, 1943.
*262 A. A. Armstrong, of Washington, D. C. (Samuel O. Clark, Jr., Sewall Key, and Harry Marselli, all of Washington, D. C., Donald C. Miller, of Cleveland, Ohio, and Gerald P. Openlander, of Toledo, Ohio, on the brief), for appellant.
Merwyn G. Leatherman, of Toledo, Ohio (Walter A. Eversman, Merwyn G. Leatherman, and Williams, Eversman & Morgan, all of Toledo, Ohio, on the brief), for appellee.
Before HAMILTON, MARTIN, and McALLISTER, Circuit Judges.
MARTIN, Circuit Judge.
The Government appeals from a judgment of the district court awarding appellee a refund, with interest, of a collected income tax deficiency assessment for the year 1931.
Appellee is administrator of the estate of his mother, Elizabeth Eversman, deceased, and is her sole heir at law and next of kin. Mrs. Eversman and her son owned, in equal undivided interests, a parcel of improved real estate known as the Wagner property, situated in the retail business district of Toledo, Ohio. She had acquired her half interest in 1905, and he had become the owner of the other half interest in August 1913. The value of Mrs. Eversman's half interest in the property on March 1, 1913, was $87,500. In her annual income tax returns filed during the period from March 1, 1913, to December 31, 1930, she claimed a uniform annual depreciation of $750 on her undivided half interest in the Wagner Building.
On June 8, 1931, Mrs. Eversman and her son executed and acknowledged a contract of sale in writing, dated June 1, 1931, by which they agreed to sell and convey the Wagner property to four members of the Kobacker family.
The consideration agreed to be paid by the buyers totaled $175,000; whereof $20,000 was acknowledged to have been paid in cash upon the execution of the agreement, $5,000 was to be paid on December 1, 1931, and additional instalments of $5,000 each were payable on the first days of June and December of each of the calendar years from 1932 to 1936, both inclusive; and the remaining $100,000 of the purchase price was payable on June 1, 1937. It was provided that monthly instalments of interest on the deferred payments should be paid at the rate of six per cent per annum; and the buyers were granted the privilege of payment of any deferred payment at any time prior to its due date. It was provided that if the buyers should pay to the sellers, on or before September 21, 1931, an additional sum of $20,000 for application upon the purchase price, the last instalment payment would be reduced from $100,000 to $65,000; thereby, in such event, lowering the total consideration from $175,000 to $160,000.
The buyers were given immediate possession, but the title to the property was retained by the sellers, who agreed upon receipt *263 of payment of the full purchase price, to convey the property to the buyers, their heirs and assigns, by a good and sufficient deed of special warranty. Provision was made that the buyers should at all times, while the contract was in force, pay all taxes and assessments, maintain the premises in good condition and repair, keep the building and improvements insured, and indemnify the sellers against all loss and damage resultant from the use and occupancy of the premises by the buyers.
The contract of sale contained this important provision: "Buyers shall have the right at any time prior to June 1, 1934, upon six months' notice, to cancel and annul this contract, provided at the time of such cancellation and annulment they shall have paid sellers on the principal of the purchase price not less than Forty Thousand Dollars ($40,000) and shall not then be in default of any other payment of principal or interest or in default of the performance of any other term or condition of this contract."
Pursuant to their right under the foregoing clause, the Kobackers, on June 27, 1931, notified Mrs. Eversman and her son, Walter A. Eversman, of their intention to cancel and annul the contract of sale, such cancellation to become effective six months after receipt of the notice. The premises were duly surrendered by the Kobackers to the Eversmans at the expiration of the six months' period on December 27, 1931, at which time the Eversmans had received during the year 1931, on account of the contract of sale, a total of $40,000 in four separate payments made by the Kobackers.
Due to the insolvency and liquidation of several large banks in the city of Toledo, and to the general economic depression prevailing, the Wagner property had, at the time of its repossession by the Eversmans on December 27, 1931, a total fair market value not in excess of $90,000. Obviously, the value of Mrs. Eversman's half interest therein did not, at that time, exceed $45,000.
Mrs. Eversman did not include as a part of her taxable income for 1931 the $20,000 which she had received as her half of the $40,000 paid during 1931 by the Kobackers, as buyers of the Wagner property, but she did attach to her income tax return for that year a statement setting forth a full history of the transactions which have been narrated.
Mrs. Eversman died on August 25, 1933; and, after her death, the Commissioner of Internal Revenue assessed a deficiency tax against her estate, by reason of his ruling that there should be included as part of her taxable income for 1931 the sum of $20,000 which she had received from the total $40,000 paid by the Kobackers. The appellee paid the deficiency assessment, together with accumulated interest, and filed an appropriate claim for refund, alleging that the assessment was illegal in that his decedent, Mrs. Eversman, had realized no taxable gain in 1931 from the sale and subsequent repossession of the Wagner property; but, on the contrary, had in fact sustained a loss.
The Commissioner disallowed the claim for refund, pursuant to the provisions of Article 353 of Treasury Regulations 74, promulgated under the Revenue Act of 1928, as amended by Treasury Decision 4360, XII-1 Cum.Bull. 116-117 (1933). [See footnote for pertinent Treasury Regulations and amendment.][1]
*264 After disallowance by the Commissioner of the refund claim, this suit was instituted; and, following a trial on stipulation of facts supplemented by open court testimony, the district court concluded as a matter of law that: (1) the contract of June 1, 1931, was for the sale of real property and was an instalment obligation within the meaning of Section 44(b) of the Revenue Act of 1928, 26 U.S.C.A. Int.Rev.Acts, page 364, (2) the cancellation of the agreement of June 1, 1931, and the return of the Wagner property to the sellers constituted a satisfaction of the instalment obligation of June 1, 1931, at other than its face value, within the meaning of Section 44(d) of the Revenue Act of 1928, and its provisions apply and control; [See footnote for pertinent provisions of Section 44, 26 U.S.C.A. Int.Rev.Acts, page 363.][2] (3) irrespective of the provisions of Section 44 of the Revenue Act of 1928, *265 a loss resulted to the defendant upon the repossession of property, worth then approximately $30,000 less than its depreciated March 1, 1913, value, which more than offset any gain to the decedent through the receipt of $20,000 cash in 1931; and that (4) no taxable income was realized by Elizabeth Eversman in 1931 from the transaction with Joseph I. Kobacker and his associates.
The Government insists that the money received by appellee's decedent, Mrs. Eversman, in the transactions involved in this suit constituted income realized by her and taxable to her within the broad sweep of the definition of gross income contained in Section 22(a) of the Revenue Act of 1928, Chapt. 852, 45 Stat. 791, 26 U.S.C.A. Int. Rev.Acts, page 354.[3] The contention is that Section 44(b) of the Revenue Act of 1928 applies only to an instalment sale extending over more than one taxable year, while in the controversy at bar the entire transaction was consummated within one taxable year. It is contended further that the decedent, Mrs. Eversman, did not elect to bring herself within the coverage of Section 44(b) of the statute, or to report income thereunder; and that the provisions of the section are applicable only where such election is expressly made by the taxpayer. Finally, it is urged that the provisions of Section 44(d) of the statute are applicable only where an instalment seller has previously elected to report income under Section 44(a) or Section 44(b).
It is conceded by the Government that if the formula prescribed in Section 44(d) is applicable, the decedent had no taxable gain from the transaction, because the value of her property at the time of repossession was less than her basis; but it is insisted that Section 44(d) cannot properly be applied, because the decedent did not bring herself within the provisions of Section 44(b), and for the further reason that the instalment obligation was not satisfied "at other than its face value," inasmuch as the contract was cancelled and annulled in accordance with the right of cancellation expressly contained in the contract.
The language of Section 44(d) is clearly to the effect that, if an instalment obligation is satisfied at other than its face value, or otherwise disposed of, the taxpayer is entitled to compute profit or loss under the section. Mrs. Eversman undoubtedly held an instalment obligation, which was "satisfied" or "disposed of." Her satisfaction and disposition of it was "at other than its face value." The face value of that obligation was $175,000, which was satisfied by a payment of $40,000 and the surrender of the property, which, at the time of surrender, had a value not exceeding $90,000.
The argument of the Government has been rejected in Boca Ratone Co. v. Commissioner of Internal Revenue, 3 Cir., 86 F.2d 9, where it was held that only two conditions are necessary to bring a case within Section 44(d) of the Revenue Act of 1928: namely, (1) the obligation must be an instalment obligation, and (2) it must have been satisfied at other than its face value. There, as here, when the transaction was over, the purchasers had been *266 released and discharged with finality and their obligation satisfied within the meaning of the statute. The facts of this case bring it as squarely as did the facts of the Boca Ratone case within the terms of Section 44(d) of the Revenue Act of 1928; and not, as is contended by the Government, within the scope of Article 353 of Regulations 74. See, also, Wilcox v. Henricksen, D.C., 31 F. Supp. 700. Compare Walker v. Thomas, 5 Cir., 119 F.2d 58.
We find no force in the argument that Mrs. Eversman was required to make an express election in her tax return, in order to receive the benefits available to her under Sections 44(b) and 44(d) of the statute. The Government would have us read into the statute requirements not found there. No provision to the effect that the taxpayer must have made an express election in a previous taxable year is found in the statute. While Mrs. Eversman, in her 1931 income tax return, did not expressly state her election to report under Section 44(b) the $20,000 received from the property sale during that year, she did file, with her return, a detailed report of the sale and repossession of the Wagner property. The course pursued by her evidenced a manifest belief that the transaction which she had described entailed no additional tax liability. The Treasury Department was put in possession of all the relevant facts. Her failure to adopt fruitless ritualistic measures should not foreclose the allowance to her of all lawful benefits under the statute.
The requirement for applicability of Section 44(b) of the Revenue Act of 1928 is only that initial payments shall not exceed forty per cent of the selling price. Here, the initial payments made by the buyers aggregated $40,000, which was materially below that percentage. Cancellation of a contract is certainly not the equivalent of payment of obligations under it.
There appears no valid reason for holding Section 44(b) of the statute inapplicable from the mere fact that the sales contract was executed and terminated within the same taxable year. See Duram Bldg. Corporation v. Commissioner of Internal Revenue, 2 Cir., 66 F.2d 253.
Doyle v. Commissioner of Internal Revenue, 2 Cir., 110 F.2d 157, 130 A.L.R. 989, and Virginia Iron, Coal & Coke Co. v. Commissioner of Internal Revenue, 4 Cir., 99 F.2d 919, cited by the Government as supporting the contention that the $20,000 cash received by Mrs. Eversman in 1931 constituted part of her taxable income, are not deemed in point; for, in both cases, the contracts were executory and involved a single rather than two separate transactions. In the Doyle case, the seller did not relinquish possession of the real estate and the payments made constituted earnest money paid under an executory contract to sell real estate. In the Virginia Iron case, only an unexercised option to buy was involved.
In view of our conclusion that the district court correctly applied the provisions of Sections 44(b) and 44(d) of the Revenue Act of 1928 to the factual situation revealed in the record, there is no necessity for discussion of the additional holding below that, even if Section 44 were not applicable, appellee's decedent received no taxable income from the real estate transaction in 1931.
The judgment of the district court is affirmed.
NOTES
[1] Treasury Regulations 74, promulgated under the Revenue Act of 1928: Art. 352. Sale of real property involving deferred payments. Under Section 44 deferred-payment sales of real property fall into two classes when considered with respect to the terms of sale, as follows:
(1) Sales of property on the installment plan, that is, sales in which the payments received in cash or property other than evidences of indebtedness of the purchaser during the taxable year in which the sale is made do not exceed 40 per cent of the selling price.
(2) Deferred-payment sales not on the installment plan, that is, sales in which the payments received in cash or property other than evidences of indebtedness of the purchaser during the taxable year in which the sale is made exceed 40 per cent of the selling price.
Art. 353. Sale of real property on installment plan. In transactions included in class (1) in article 352 the vendor may return as income from such transactions in any taxable year that proportion of the installment payments actually received in that year which the total profit realized or to be realized when the property is paid for bears to the total contract price.
If for any reason the purchaser defaults in any of his payments, and the vendor returning income on the installment basis repossesses the property, the entire amount received in installment payments and retained by the vendor, less the sum of the profits previously returned as income and an amount representing proper adjustment for exhaustion, wear and tear, obsolescence, amortization, and depletion of the property while in the hands of the purchaser, will be income of the vendor for the year in which the property is repossessed, and the basis of the property in the hands of the vendor will be the original basis at the time of the installment sale.
If the vendor chooses as a matter of consistent practice to return the income from installment sales on the straight accrual or cash receipts and disbursements basis, such a course is permissible, and the sales will be treated as deferred-payment sales not on the installment plan.
T. D. 4360, XII-1 Cum. Bull. 116-117 (1933), amended the second paragraph of Article 353 of Regulations 74 to read as follows:
If the vendor had retained title to the property and the purchaser defaults in any of his payments, and the vendor repossesses the property by agreement or process of law, the difference between (1) the entire amount of the payments actually received on the contract and retained by the vendor and (2) the sum of the profits previously returned as income in connection therewith and an amount representing what would have been a proper adjustment for exhaustion, wear and tear, obsolescence, amortization, and depletion of the property during the period the property was in the hands of the purchaser had the sale not been made, will constitute gain or loss, as the case may be, to the vendor for the year in which the property is repossessed, and the basis of the property in the hands of the vendor will be the original basis at the time of the sale. If the vendor had previously transferred title to the purchaser, and the purchaser defaults in any of his payments and the vendor reacquires the property, such reacquisition shall be regarded as a transfer by the vendor, in exchange for the property, of such of the purchaser's obligations as are applied by the vendor to the purchase or bid price of the property. Such an exchange will be regarded as having resulted in the realization by the vendor of gain or loss, as the case may be, for the year of reacquisition, measured by the difference between the fair market value of the property reacquired and the basis in the hands of the vendor of the obligations of the purchaser which were applied by the vendor to the purchase or bid price of the property. The basis in the hands of the vendor of the obligations of the purchaser so applied will be the excess of the face value of the obligations over an amount equal to the income which would be returnable were the obligations satisfied in full. The fair market value of the property reacquired shall be presumed to be the amount for which it is bid in by the vendor in the absence of clear and convincing proof to the contrary. If the property reacquired is subsequently sold, the basis for determining gain or loss is the fair market value of the property at the date of reacquisition.
[2] Revenue Act of 1928, c. 852, 45 Stat. 791. "§ 44. Installment Basis. (a) Dealers in Personal Property. Under regulations prescribed by the Commissioner with the approval of the Secretary, a person who regularly sells or otherwise disposes of personal property on the installment plan may return as income therefrom in any taxable year that proportion of the installment payments actually received in that year which the gross profit realized or to be realized when payment is completed, bears to the total contract price.
"(b) Sales of Realty and Casual Sales of Personalty. In the case (1) of a casual sale or other casual disposition of personal property (other than property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year), for a price exceeding $1,000, or (2) of a sale or other disposition of real property, if in either case the initial payments do not exceed 40 per centum of the selling price, the income may, under regulations prescribed by the Commissioner with the approval of the Secretary, be returned on the basis and in the manner above prescribed in this section. As used in this section the term `initial payments' means the payments received in cash or property other than evidences of indebtedness of the purchaser during the taxable period in which the sale or other disposition is made. * * *
"(d) Gain or Loss upon Disposition of Installment Obligations. If an installment obligation is satisfied at other than its face value or distributed, transmitted, sold, or otherwise disposed of, gain or loss shall result to the extent of the difference between the basis of the obligation and (1) in the case of satisfaction at other than face value or a sale or exchange the amount realized, or (2) in case of a distribution, transmission, or disposition otherwise than by sale or exchange the fair market value of the obligation at the time of such distribution, transmission, or disposition. The basis of the obligation shall be the excess of the face value of the obligation over an amount equal to the income which would be returnable were the obligation satisfied in full."
[3] Revenue Act of 1928, c. 852, 45 Stat. 791. "§ 22. Gross Income. (a) General Definition. `Gross income' includes gains, profits, and income derived from salaries, wages, or compensation for personal service, of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544487/ | 133 F.2d 54 (1943)
GUARANTY UNDERWRITERS, Inc.,
v.
JOHNSON (two cases).
Nos. 10502, 10499.
Circuit Court of Appeals, Fifth Circuit.
January 15, 1943.
Rehearing Denied January 27, 1943.
*55 John W. Muskoff and Alston Cockrell, both of Jacksonville, Fla., and Lawrence S. Camp, of Atlanta, Ga., for appellant.
John F. Davis, Solicitor, Securities & Exchange Commission, and Louis Loss, Attorney, Sec. & Exchg. Com., both of Philadelphia, Pa., for appellee.
Before SIBLEY, HUTCHESON, and HOLMES, Circuit Judges.
Case No. 10,502.
SIBLEY, Circuit Judge.
The plaintiff-appellant's amended petition was dismissed on motion in the District Court for want of jurisdiction, and also on the merits if they should be considered. This appeal followed.
The material facts alleged are: Appellant in 1934 became a registered dealer in securities under the provisions of Section 15(b) of the Securities Exchange Act of 1934, 15 U.S.C.A. § 78o(b). During 1940 and 1942 the Securities and Exchange Commission by its agents was investigating appellant's business under Section 21, 15 U.S.C.A. § 78u, and its enquiries among customers was resulting in the practical destruction of the business. As a result on July 30, 1942, appellant's board of directors instructed the president to secure an appointment with the Commission's regional director and explain the appellant's desire to withdraw from the business with the privilege of closing all offices, and that the president withdraw the Company from the Florida Securities Commission and the National Association of Securities Dealers. On August 19 the president notified the Securities and Exchange Commission that it desired to withdraw its registration statement as a dealer, and requested and consented to the revocation of its registration, and that it was resigning its membership in the National Association and withdrawing its Florida registration, and was cancelling the authority of all salesmen. On August 7, however, the Commission had ordered a proceeding to determine seven things, the last three of which related to the propriety of revoking appellant's registration, or suspending it pursuant to Section 15(b) and 15A of the Securities Exchange Act of 1934; and the appellee Johnson was designated as the officer to conduct a hearing at Jacksonville, Florida, on August 20. Appellant filed a motion with Johnson to suspend his enquiry for want of jurisdiction to proceed, because of its consent to and request for revocation of its registration. Johnson nevertheless was proceeding to subpoena books and witnesses, on a "fishing expedition" contrary to appellant's constitutional rights, creating dissatisfaction with customers, and adverse public sentiment against appellant as a preliminary to criminal prosecution, tending to prevent a fair trial and stir up many civil suits, which would be costly to defend and were likely to bankrupt appellant; there is no remedy at law for the wrong about to be done, and declaration of rights was prayed and an injunction against Johnson to prevent him from requiring the production of its books and records, or holding any further hearing.
The district judge thought he was without jurisdiction of the subject matter because exclusive jurisdiction was in the Circuit Court of Appeals to review orders of the Securities and Exchange *56 Commission under Section 25(a) of the Act, 15 U.S.C.A. § 78y(a). Since his decision we have held that this preliminary order to hold an enquiry is not the sort of order which may be thus reviewed; Guaranty Underwriters, Inc. v. Securities and Exchange Commission, 5 Cir., 131 F.2d 370. Appellant contends that with this objection to the jurisdiction of the District Court removed, although the general jurisdiction is not available because Johnson is not an inhabitant of the district where he is sued as he points out in one ground of his motion to dismiss, still a special jurisdiction and a special venue are provided by Section 27, 15 U.S.C.A. § 78aa. We considered a similar contention under similar provisions in the Federal Power Act and denied it in Mississippi Power & Light Co. v. Federal Power Commission (Mississippi Power & Light Co. v. Slaff), 5 Cir., 131 F.2d 148. As we said there, so we hold here, the remedy appellant must seek lies in refusing compliance with unlawful demands for records or testimony, which can be enforced only by application to the District Court under Section 21(c), 15 U.S.C.A. § 78u(c). A bona fide contention of this sort will not result in punishment under the last sentence of Sect. 21(c).
But if we are wrong in concluding that there is no proper venue, there is a good reason for dismissal on the other ground of the motion that no claim is stated on which relief can be granted. It is manifest that Johnson himself has no rights which would be the subject of a declaratory judgment. He is asserting only the right and authority of the Commission, and it is not a party. The Commission's rights cannot be declared effectively without proceeding against it. And if a case of irreparable injury to property rights is alleged, which might fall within the province of equity to prevent by injunction, and if Johnson and the Commission are without any power to proceed to enquire about revoking and suspending appellant's registration after it consents to a revocation, nevertheless the injunction ought not to issue. The hearing ordered is not confined to enquiry about revocation and suspension, but proposes in the first four objects stated to enquire whether specified charges of business misconduct are true, whether registrant has in those matters wilfully violated Section 15(c) of the Securities Exchange Act of 1934, 15 U.S.C.A. § 78o (c) and specified rules of the Commission or Section 17(a) of the Securities Act of 1933, 15 U.S.C.A. § 77q(a), with reference to fraud and deceit in interstate sales, or Section 5(a) of the Securities Act of 1933, 15 U.S.C.A. § 77e(a), as to dealing interstate in unregistered securities, each of which enquiries might result in criminal prosecution or civil actions, as the complaint itself alleges. The hearing would not become unlawful and tortious merely because the question of revoking or suspending registration has become moot, if indeed it has, seeing that the right to withdraw registration which is given a registrant is not absolute but "upon such terms and conditions as the Commission may deem necessary in the public interest or for the protection of investors", Section 15(b), 15 U.S.C.A. § 78o(b). Whether for lack of venue or on the merits, the complaint was rightly dismissed. Jones v. Securities & Exchange Commission, 298 U.S. 1, 56 S. Ct. 654, 80 L. Ed. 1015, arose before the above quoted provision became law, and on a proceeding in the District Court by the Commission to enforce a subpoena, and involved only a question of registration. It does not govern here.
Judgment affirmed.
Case No. 10,499.
In this case the alleged facts are in substance the same as in the preceding Case No. 10,502, with elaboration of charges of prejudice against Johnson, capricious and arbitrary conduct, and irreparable damage. Injunction alone was prayed. The defense was the same as above, with the addition of a plea of res judicata based on the judgment in No. 10,502, which had not then been appealed from. The complaint was dismissed on the plea of res judicata.
This plea was technically invalidated when appeal was taken from the former judgment. We have now affirmed the former judgment, and it again stands as a bar to further substantially identical litigation between the same parties. But in any case the reasons given for affirming the former judgment require that this complaint also should be dismissed. We affirm the dismissal, it not appearing that any different or better case could be alleged.
Judgment affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544522/ | 133 F.2d 266 (1943)
ZANGERLE & PETERSON CO.
v.
VENICE FURNITURE NOVELTY MFG. CO.
No. 8044.
Circuit Court of Appeals, Seventh Circuit.
January 26, 1943.
*267 *268 J. Bernhard Thiess and Bertram Wm. Coltman, both of Chicago, Ill., for appellant.
Bernard A. Schroeder, Samuel A. Karlin, and George A. Chritton, all of Chicago, Ill., for appellee.
Before EVANS, MAJOR, and MINTON, Circuit Judges.
MINTON, Circuit Judge.
This is a suit to enjoin the infringement of a patent and to recover damages therefor; and in the alternative, for the same relief for alleged unfair competition. The trial court found the patent invalid and the charges as to unfair competition not sustained, and dismissed the complaint. The plaintiff appeals.
The first question we are required to decide is as to the validity of the patent. If the patent is valid, infringement is admitted.
The patent No. 126,548 was issued April 8, 1941, to John W. Wilson on his application filed February 4, 1941, and the plaintiff is now the owner thereof. The term of the patent is for three and one-half years, and covers a design for a lamp table known in the plaintiff's line of merchandise as No. 510. In the application for the patent, the applicant amended the dominant features clause therein to read: "The dominant features of the design comprise a table provided with a top having rolled ends, the sides below the top having lower edges that converge toward the rolled ends beginning at a medial point, there being curved legs that extend downwardly from said top which are provided with carved motifs at their upper ends."
The Patent Office called attention to Furniture Age, a trade publication, of February 1940, and a table which the plaintiff was then manufacturing, and advertising and offering for sale in this publication. This was a cocktail table, No. 456. The Patent Office rejected the application on February 18, 1941 for the following reason: "The design is lacking in patentable invention as it involves a mere modification of the top and legs of the tall table along the lines clearly taught in the low table of the publication reference."
The Patent Office also recommended that the dominant features clause be eliminated. On March 6, 1941, applicant amended his application by cancelling out the dominant features clause, and raised the question that although the issue of Furniture Age in question was the February 1940 issue, the date of this issue was not conclusive proof that it was actually published more than a year before the filing date of the application, February 4, 1941.[1]
The Patent Office responded with a copy of Furniture Age of January 1940 with the same advertisement in it, and again advised the elimination of the dominant features clause, stating:
"The present `dominent (sic) features' clause should accordingly be canceled or amended so as to confine it to a new feature or features which distinguish it in an ornamental sense from the cited art. * * *
"As presented, the design is lacking in patentable invention as it involves a mere modification of the top and legs of the tall table along the lines clearly brought out in the low table of the January, 1940 `Furniture Age' publication reference."
The Patent Office had overlooked the applicant's amendment of March 6, 1941, eliminating the dominant features clause, but it nevertheless pointed out the unpatentability of the design. The Patent Office, after having had called to its attention the elimination of the dominant features clause, granted the patent.
If the application with the statement of the dominant features of the design in it spelled unpatentability because they read upon a design that was public property, it is difficult for us to understand how the striking out of the statement of the dominant features makes it patentable. It is apparent that the dominant features, the essence of the design of lamp table No. 510, read squarely upon and are the dominant features of cocktail table No. 456. In other words, lamp table No. 510 is cocktail table No. 456 with a shorter, narrower top and longer legs, and with a shelf about half-way between the top and the floor. Nothing is claimed for the shelf, and could *269 not be, as it is as old as the type of table itself.
Was this "invention"? We think not. Design patents, like mechanical patents, must show originality and the exercise of inventive faculty. It is not sufficient to take old designs or forms and adapt them to new purposes. As we said in Howell Co. v. Royal Metal Mfg. Co., 7 Cir., 93 F.2d 112, 113:
"To entitle a party to the benefit of the statute, 35 U.S.C.A. § 31, the device must not only be new, but inventively new. The readaptation of old devices or forms, however convenient, useful, or beautiful they may be in their new roles, is not invention. Smith v. Whitman Saddle Co., 148 U.S. 674, 13 S. Ct. 768, 37 L. Ed. 606.
"We are of the opinion that the present case comes within the rule thus announced, and that plaintiff's particular redesign or recreation exhibited no invention. In view of the prior art, only the ordinary skill of a designer of chairs was necessary, in order to achieve the design of the patent."
Again, in S. Dresner & Son, Inc., v. Doppelt et al., 7 Cir., 120 F.2d 50, 51, we stated: "By the terms of the present Act patentable design for an article of manufacture must be characterized by an invention of a new, original and ornamental design. The mere production of such a design is not sufficient. The word `produced' which appeared in the earlier enactments has disappeared from the present Act, and there is no authority to substitute it for the word `invented,' and thereby qualify the usual concept of invention. However, the words `invented' and `new' and `original' must be construed together in applying the usual rule that there must be an exercise of inventive genius, which precludes the grant of patent monopoly upon the exercise of mere skill of an ordinary designer who is chargeable with knowledge of the prior art."
The plaintiff did not invent the design of the lamp table No. 510. It produced it from the prior art design of cocktail table No. 456. The reducing of the size of the table, lengthening the legs and putting in the shelf were the exercise of the mere skill of an ordinary designer in the trade. The ideas were old and at hand; the skilled designer had only to use them. The use made of them in the instant case did not introduce a new creation. The trial court properly held that the patent was invalid.
This brings us to a consideration of the second phase of the case: Was there unfair competition? The defendant frankly admits it copied the plaintiff's table. If the plaintiff never had a patent, then the mere act of copying did not amount to unfair competition. After a patent expires, one may copy it. It then belongs to the public. The patentee's monopoly is gone. Singer Mfg. Co. v. June Mfg. Co., 163 U.S. 169, 16 S. Ct. 1002, 41 L. Ed. 118. If one never had a patent, the situation is exactly the same. Copying a design not patentable is not unfair competition. Sinko v. Snow Craggs Corp., 7 Cir., 105 F.2d 450.
There is no evidence that the defendant represented its goods as the goods of the plaintiff. In other words, there was no act of "palming off" by the defendant. It is argued by the plaintiff that even though the patent was invalid, the defendant by copying it had put it in the power of its dealers to "palm off" the defendant's table as the plaintiff's in other words, that the defendant was guilty of "contributory" unfair competition.
It is admitted that the Illinois law governs this issue. We have found no case decided by Illinois courts or elsewhere that recognizes the existence of this novel doctrine of "contributory" unfair competition. If one does what he has a legal right to do, as in the case at bar, copying an article of merchandise that is not covered by a valid patent, but does not represent the copies as the product of the party making the original and does nothing in the merchandising of the goods to induce one's customers to engage in "palming off" or to indicate to them how they may "palm off" the copy as the product of the original maker, such conduct is not illegal and does not amount to unfair competition, nor could it be stretched into the novel doctrine of "contributory" unfair competition. Even in contributory infringement of a patent, the infringer can be liable as such only when he knowingly participates in the infringement. Mid-Continent Investment Co. v. The Mercoid Corporation, 7 Cir., 133 F.2d 803.
The essence of unfair competition is fraud. Hughes v. West Publishing Co., 225 Ill.App. 58, 66; Ambassador Hotel *270 Corp. v. Hotel Sherman Co., 226 Ill.App. 247, 265. And like fraud, it is never presumed, and its existence must be established by a clear preponderance of the evidence. Ball v. Siegel, 116 Ill. 137, 147, 4 N.E. 667, 56 Am.Rep. 766; Stevens-Davis Co. v. Mathers Co., 230 Ill.App. 45.
Since there was no actual "palming off" by the defendant, or evidence that it knowingly did anything to induce or assist another to do so, there can be no unfair competition unless the plaintiff has clearly established that its table had acquired in the trade a secondary meaning, in which event the mere copying may be unfair competition. To establish secondary meaning, the article itself must be so clearly identified with its source that its supply from any other source is clearly calculated to deceive the public and lead it to purchase the goods of one for that of another. Sinko v. Snow Craggs Corp., 7 Cir., 105 F.2d 450. To acquire a secondary meaning in the minds of the buying public, an article of merchandise when shown to a prospective customer must prompt the affirmation, "That is the article I want because I know its source," and not the negative inquiry as to, "Who makes that article?" In other words, the article must proclaim its identification with its source, and not simply stimulate inquiry about it. Kellogg Co. v. National Biscuit Co., 305 U.S. 111, 118, 59 S. Ct. 109, 83 L. Ed. 73.
The plaintiff has been in the business of manufacturing high-grade furniture for seventy years, and enjoys a good reputation. Table No. 510 first appeared in April, 1940. It had no marks of identity as to the source, except a plate underneath the top and the number 510 branded into the bottom of the shelf. In the year and a half the table was on the market, the plaintiff had been able to market less than a thousand of them, most of which were sold in New York. There was evidence of two or three dealers that a few customers came in and asked for Zangerle & Peterson lamp tables and described the design. While this tends to show that these few customers knew the plaintiff made such a table, it does not show whether these customers desired merely a lamp table of this design, or one made by Zangerle & Peterson. There was also evidence that one customer saw the plaintiff's table in a Fifth Avenue shop in New York and liked it. She inquired the name of the manufacturer and was told it was Zangerle & Peterson. She shopped around and finally bought two of the defendant's tables at another place. She did not ask and was not told who manufactured the tables she bought. She picked out the table she liked. Whether it was because of the design or the maker does not appear.
We have considered all of the evidence in this case, and we are satisfied that the trial court's finding that the plaintiff's lamp table No. 510 had not acquired a secondary meaning in the trade is not clearly erroneous. In the absence of actual "palming off" or the existence of a secondary meaning in the trade, the copying by the defendant of the plaintiff's unpatented design did not amount to unfair competition. Where no one has the exclusive right to the use of a design, all may use it with impunity, so long as the public is not misled in the methods of marketing the product. Kellogg Co. v. National Biscuit Co., 305 U.S. 111, 119, 59 S. Ct. 109, 83 L. Ed. 73.
The trial court did not err in entering judgment dismissing the plaintiff's complaint. The judgment is affirmed.
NOTES
[1] 35 U.S.C.A. § 73. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544524/ | 213 Md. 482 (1957)
132 A.2d 478
CLARKE ET AL.
v.
LACY
[No. 228, October Term, 1956.]
Court of Appeals of Maryland.
Decided June 4, 1957.
The cause was argued before COLLINS, HENDERSON, HAMMOND and PRESCOTT, JJ., and McLAUGHLIN, J., Associate Judge of the Fourth Judicial Circuit, specially assigned.
John D. Gilmore, Jr., with whom were Conroy, Williams, Nylen & Gilmore, M.J. Cuff and John F. Lillard, Sr., on the brief, for appellants.
*485 Theodore L. Miazga, with whom was Matilda M. Miazga on the brief, for appellee.
HAMMOND, J., delivered the opinion of the Court.
To be determined in this appeal is the validity of the contention of Phillips Clarke and Mae Clarke, his sister, appellants, that they still have contract rights to develop, and share in, certain land of Mary Lacy, appellee. The chancellor decided that under the terms of the contract their rights had expired with the passage of time and dismissed their bill seeking declarations of their claimed rights and an injunction against transfer of the land.
Mary Meidel, the mother of Mary Lacy, owned some thirty or forty acres close to the Anacostia River and the District of Columbia line. She died in 1946 and the property passed under her will to Mrs. Lacy. Some years ago, in the process of the building of the Baltimore-Washington Parkway, the heart of the property was taken by condemnation. Some six acres were left on the southeast side of the parkway, with all access denied. The parties refer to this tract as parcel B. The remainder of the property, containing some eighteen acres, is on the southwest side of the parkway and is called parcel A. It was stipulated that Mrs. Lacy now has, and at all times here material had, "good merchantable record title" to parcel B and to some twelve acres, duly described, of parcel A, acquired under the will of her mother, as well as that Mrs. Lacy now has, and at all times here material had, "possessory title" to the remainder of parcel A, and that this remainder had "been held adversely, openly, notoriously, hostilely, and continuously" by her mother, from January 2, 1896, to the date of her death, and by Mary Lacy since the date of her mother's death to the present, against the whole world, but that said possessory title has not been established as a matter of record in the Circuit Court for Prince George's County, Maryland, and that "no one has ever asserted a claim against said possessory title."
In the spring of 1953, the Clarkes approached Mrs. Lacy to arrange for the development of the land into a commercial or industrial center. The Clarkes were experienced in the *486 development of raw land, largely in the building of houses, and had had some experience and considerable familiarity with commercial or industrial development. After various discussions, the parties superseded two previously executed informal plans of development by a final contract dated July 20, 1953. The contract was intended to cover any land owned by Mrs. Lacy in the area and, for this reason, the acreage mentioned in the contract is thirty acres because Mrs. Lacy thought she had additional land not a part of parcels A and B. This belief proved erroneous so that the contract really relates to those parcels. Under the terms of the contract, the Clarkes agreed to pay real estate taxes for 1953 and to proceed with studies looking to the development of the land for commercial or industrial use. The land was zoned residential so this contemplated rezoning. When it was feasible to do so, the Clarkes agreed to attempt to procure (a) a tenant for each of one or more sites who would lease a site and a building to be erected for not less than five years, (b) the builder who would erect the building, (c) a loan commitment sufficient to pay all or most of the construction costs, as well as to find sufficient additional funds for the construction of the building. When the Clarkes had provided for the construction, financing and occupancy of a site or unit in the new project, Mrs. Lacy was to convey to them an undivided one-half interest in that site. If any part, or all, of the land were condemned by or sold to public authority, the Clarkes were to get half of the amount received in excess of $3,000 an acre. Paragraph 6 of the contract gave the Clarkes one year from its date to produce a tenant and otherwise comply with the contract requirements as to the construction and financing of the first unit. If they did not provide a tenant within a year, the contract was at an end; if they did, the contract was to continue for an additional five years for the development of the rest of the property. Paragraph 7 provided that the one year period of paragraph 6 would not begin to run until the rezoning of all or part of the tract had been approved. Paragraph 10 provided that the Clarkes, at their expense, would have the title to parcels A and B searched and "should such title be found to be defective", *487 that Mrs. Lacy at her expense would "immediately institute appropriate proceedings to remove the cloud upon her title". It was further provided that "the one-year limitation referred to in paragraph 6 above shall not commence to run until said cloud has been removed." Paragraph 11 states that should Mrs. Lacy's title "to all or any part of said land be found to be defective and that such cloud may not be removed by legal or other means within 12 months after discovery thereof," the Clarkes have the option to terminate the agreement.
As soon as the contract was executed, the Clarkes paid the taxes they had agreed to pay and sought rezoning of parcel A. To help in the procuring of the rezoning and the layout of and planning for the tracts, the Clarkes employed one Fred Tuemmler, a former employee of the Park and Planning Commission, who is engaged in private practice as a land planning expert. It is stipulated that they expended $12,000, most of which went for his services. Rezoning of the property to light industrial was approved on June 16, 1954. The Clarkes attempted to procure a railroad siding to the property but to do this it was necessary to cross land owned by the Park and Planning Commission, and permission could not be secured. The original one year limitation of the contract would have expired on July 20, 1954, but since it was enlarged by the contract to one year from rezoning, the Clarkes had until June 16, 1955, to find a tenant for a first unit. They found no tenant within the time limit. Mrs. Lacy contends that for this reason all rights and obligations on both sides terminated on June 16, 1955, and that the Clarkes have no interest in or claim to the property. On the other hand, the Clarkes contend that the contract has not expired according to its terms. Their contention is based on two grounds: first, that Mrs. Lacy does not have good title to approximately one-third of parcel A, so that her title to a part of the land is "defective" within the meaning of the contract, and the one year limitation is stretched to one year from the time she shall have removed the cloud on her title; and second, that time was not of the essence of the contract and because of the extensive efforts and substantial expense *488 to which they went (a) to develop or attempt to develop the property (which increased its value), (b) to sell parts of it to a public body, and (c) to trade portions of it to a public body in exchange for other lands more suitable for immediate development, they should not be held to a firm date for compliance with the undertaking to lease an industrial unit.
The Clarkes admit that before they signed the first of the contracts they had been told, and by their investigations verified, that Mrs. Lacy had only possessory title to a substantial part of parcel A. The testimony permits the inference that they could have stipulated before the contract was signed exactly what they stipulated at the trial, as to the nature of her title and to the fact that there had been no claims against her possessory interest as to a substantial portion of parcel A, although the exact limits of the land so held would not then have been known. Nevertheless, they argue that Mrs. Lacy's title must be considered defective and to have a cloud on it because banks and other lending institutions will not make loans unless the title can be insured by a title insurance company and that title insurance companies will not insure titles based on adverse possession. They say that since the contract contemplated that loans would be made on the property, the parties must be understood to have intended that the possessory title was a defective title requiring perfecting. The Clarkes contemplated and gave attention to the possessory title, of which they had full knowledge, before they signed the two preliminary contracts and the final contract. In the two preliminary contracts they described the land as "unencumbered". This being so, it is hard to conclude that in the final contract they had a possessory title in mind as "defective" or as a "cloud" in light of the fact that Mrs. Lacy was given twelve months to remove "such cloud" by paragraph 11 of the contract "after discovery thereof". No discovery was required as to the possessory title for the facts were known. The two contracts that preceded the final contract made no mention of possible defects in title or of the perfection of title. The first referred to Mrs. Lacy's holdings as twenty acres, the second, as twenty-two acres. It was because of Mrs. Lacy's thought that she might own additional *489 land that the final contract specified the area to be thirty acres. It is not unreasonable to suppose that the parties contemplated that in the title to the additional land not included in parcels A and B, there might be a defect which would later be discovered in the course of a title search.
The contract was drawn by counsel for the Clarkes. Mrs. Lacy urges that they and their counsel stood in a fiduciary relationship to her and that advantage was taken of her. The chancellor found no evidence to support this claim and in this we think he was entirely right. Nevertheless, if there were doubt as to the meaning of the contract, it would be interpreted against those who drew it. Owens v. Graetzel, 146 Md. 361, 370. We think, however, that there is no doubt as to the meaning of the contract. The terms used have established significance in Maryland. The essential prerequisite to extension of time on the question of title is that Mrs. Lacy's title to all or part of the land involved be defective or have a cloud on it. This is the converse of saying that Mrs. Lacy must have a good or a perfect or an indisputable title, which is to say, a marketable title. 3 American Law of Property, Sec. 11.47 says that the phrases "good or perfect title", "first class title" and "indisputable title" all mean a marketable title. One that is defective or has a cloud on it clearly would be one that was not marketable. In the succeeding section, it is pointed out that there is some authority for the proposition that a marketable title means one good of record but that numerous jurisdictions hold that a good title is provable by any competent evidence, including that of adverse possession, and in section 11.49, it is noted that title by adverse possession may be a good or marketable title. Section 15.14 discusses the estate and title acquired by adverse possession and says the title so acquired "* * * is the same as any acquired by grant, descent, or conveyance and can be lost or transferred only by the methods applicable to such titles. The title is good as it stands and the claimant is in no position to compel the record owner to execute a conveyance to him. The only method of making it a record title is by the recording of a judgment or decree determining its existence, but the recording acts are not in form to require *490 that it be made a matter of record nor to affect it for lack of record." Since 1892, at least, Maryland has granted specific performance of contracts for sale of land, title to which was held by adverse possession, and has considered such titles to be good. In Lurman v. Hubner, 75 Md. 268, 272, the Court referred to the fact that there had been continuous adverse possession for some thirty years and said: "We see nothing in the record to show that this title is not perfectly good." See also Arey v. Baer, 112 Md. 541, 544; Potomac Lodge v. Miller, 118 Md. 405; Title, Incorporated v. Dubel, 177 Md. 387; Taussig v. Van Deusen, 183 Md. 436. In Garner v. Union Trust Co., 185 Md. 386, 390, it was said: "It is not every possibility of defect or even threat of contest that will be sufficient to make a title unmarketable, for it may be practically impossible for a vendor to anticipate all imaginable objections which, if they existed, would defeat his title. * * * For instance, equity will decree specific performance of a contract for the sale of land even where the title is based upon adverse possession, if the title is so clearly proved and so free from doubt that it may serve as a proper foundation for a decree against the purchaser." In his opinion below, the chancellor said: "The Court can think of no more complete description of a good adverse title than is contained in this stipulation." We agree. Taussig v. Van Deusen, supra; Stewart v. Kreuzer, 127 Md. 1, 9; Title, Incorporated v. Dubel, supra, p. 391 of 177 Md. See too Sinclair v. Weber, 204 Md. 324. The title expert produced by the Clarkes admitted that, although it was unusual, he had known of instances where title insurance companies had insured titles based on adverse possession. Mr. Clarke testified that he had not been too concerned about the fact that part of the title was possessory only while as was true for almost two years after the signing of the contract he was attempting to sell the land to a public or governmental body or to trade the land to such a body for other land, because he knew those bodies would in all probability accept the possessory title at face value.
The Clarkes could easily have provided in the contract, if they had so desired, that Mrs. Lacy's title to all of the land *491 must be made good of record or that the title must be acceptable to an attorney of their choice or that a named title company or some title company would insure it. Such provisions are not unusual. It is noted in 3 American Law of Property, Sec. 11.48, to which we have referred above, in discussing whether a title must be good of record: "However, any necessity for construction is quite generally obviated by an express provision for a record title * * *." In Sec. 11.47, to which we have also referred before, it is said: "A provision that the vendor will tender such a title as a title insurance company will approve and insure imposes an obligation on the vendor to tender an insurable title * * *." Here the obligation that rested on Mrs. Lacy was only to hold a good or marketable title and to perfect any that were not good or marketable. Since our opinion is that the chancellor was correct in deciding that she had a good and marketable title, the Clarkes can predicate no extension of time on the fact that she held a good title by adverse possession to part of her land and took no steps to have a court declare what was a fact.
We turn then to the contention that time was not of the essence and that in equity and good conscience, Mrs. Lacy must permit an extension of the contract to enable the Clarkes to find a tenant or to otherwise share in the value their expenditures of time and money have added to the property. The chancellor construed the contract of July 20, 1953, as, in substance and effect, a unilateral contract which the Clarkes purchased. They had no obligations other than to pay certain taxes, and to make efforts to find tenants or to sell to governmental bodies. They did not covenant that they would find a tenant or procure sales. They were given the option, for a stated period, of producing certain results and if they did produce, their reward was earned. We think that the chancellor's reading of the contract was accurate and that it is to be considered and construed as unilateral and in the nature of an option. Grabenhorst v. Nicodemus, 42 Md. 236. In such a case, time is of the essence as a matter of law. Coleman v. Applegarth, 68 Md. 21. In Foard v. Snider, 205 Md. 435, 446, the subject was considered and it was said: "Time is of the essence in a unilateral contract, such as an *492 option, both in law and in equity, whether expressly declared to be so or not. Williston on Contracts, Rev. Ed., Sec. 853; Pomeroy, Equity Jurisprudence, 5th Ed., Vol. 4, Sec. 1408; Maughlin v. Perry, 35 Md. 352. Each such agreement must be scrutinized to see what it requires to be done within the specified time, either expressly or by necessary implication. * * * Whatever the option requires must be done. As in the case of all offers, revocable or irrevocable, the exercise must be unconditional and in exact accord with the terms of the option." It is our view that since the Clarkes did not find a tenant for any of Mrs. Lacy's property within a year from the time zoning was approved, all of their rights in the contract ceased.
There is another weakness in the contention of the Clarkes as to an extension of time. If Mrs. Lacy was not required to take any action as to her possessory title, which is our holding, there would be no definite or measurable period to which an extension could apply. Generally, where time is found not to be of the essence, the party in default has it within his power to fulfill, within a definite period, the obligation he should have fulfilled earlier, that is, to make payment, or conveyance, or to execute a lease, or perform some other specific act. Here the Clarkes are asking what amounts to an indefinite extension so that they may have an opportunity to find a tenant or make a sale to a government agency, an opportunity they had for almost two years but were unable to gratify. We think the complications in the situation before us, if the time were to be extended, emphasize the soundness of the chancellor's finding that time was of the essence of the contract.
The Clarkes urge that Mrs. Lacy was fully aware of all the matters which delayed or impeded the securing of tenants during the period from July 20, 1953, to June 16, 1955. These included the rezoning of the property and the attempts to effect a trade of part or all of parcel A to avoid the extinguishment or impairment of the entire development by the threatened condemnation for the Anacostia River flood control project. They say that the attempt to develop parcel A was retarded, if not prohibited, by these threatened governmental *493 takings of all or part of the land, until May of 1955 when they were advised by counsel that it would be futile to continue negotiations. They urge that because the State Roads Commission was threatening to condemn parcel B (as it has since done), its development was impracticable, and that even in the absence of threatened condemnation, its lack of access was a bar and it was necessary to attempt to gain access by grant from a neighboring landowner. The Clarkes say that they could not, "knowing that some unknown portion of the land was to be taken for public purposes, produce a tenant for any portion of the parcel", and that in view of the possibility of a trade of all or part of the tract "it was conceivable and probable at times during the course of these trade negotiations that they would be developing an entirely different tract of land." They complain that Mrs. Lacy, while participating in all of these negotiations, made no demand that they produce a tenant and that within a space of three weeks from the cessation of negotiations with public bodies, notified them that the contract had been terminated. We find nothing in the conduct of Mrs. Lacy that can give any comfort or support to the Clarkes. She was merely keeping abreast of developments that could benefit her and the Clarkes, and hoping, as they hoped, for some consummation of efforts that would produce tangible financial results. They were merely doing what the contract contemplated they would do, keeping her advised as they did so. We see no estoppel or waiver.
Decree affirmed, with costs. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1544520/ | 68 B.R. 495 (1986)
Jose ACEVEDO, Plaintiff,
v.
VAN DORN PLASTIC MACHINERY COMPANY, Defendant and Third-Party Plaintiff,
v.
CUT RATE PLASTIC HANGER, INC., Third-Party Defendant.
Bankruptcy No. 883-31699-20.
United States Bankruptcy Court, E.D. New York.
June 18, 1986.
*496 Paul S. Mirman, P.C., Brooklyn, N.Y., for plaintiff.
Ford Marrin Esposito & Witmeyer, New York City, for defendant and third-party plaintiff.
Wilson Elser Moskowitz Edelman & Dicker, New York City, for third-party defendant.
ROBERT JOHN HALL, Bankruptcy Judge.
This matter was referred to this court by Chief Judge Jack B. Weinstein of the District Court of the Eastern District of New York, for a hearing and report by the Bankruptcy Court acting as Special Master. The parties suggested and the court agreed to consider the issues based upon the pleadings submitted in the underlying District Court case. In District Court, defendant Cut Rate Plastic Hangers ("Cut Rate") moved to dismiss Van Dorn Machinery's ("Van Dorn") third party complaint asserting that Van Dorn's claim was barred by Cut Rate's bankruptcy. As Special Master, the court respectfully suggests that since Cut Rate did not notify Van Dorn about the subject claim until it was too late for Van Dorn to act in Bankruptcy Court, Cut Rate's bankruptcy only bars Van Dorn's complaint procedurally. Procedurally, the automatic stay against actions against the debtor has not expired, and the case should be dismissed unless Van Dorn moves to vacate the stay.
STATEMENT OF FACTS
According to the Complaint, Jose Acevedo ("Acevedo") was injured while working on a Van Dorn plastic injection molding *497 machine at the factory of his employer, Cut Rate, on August 20, 1981. (See Complaint ¶ 18, Battari Aff., Ex.B.) Two years later, on September 2, 1983, Cut Rate filed a Chapter 11 proceeding. In Schedule A-3 to its Petition, Cut Rate listed Van Dorn as a general unsecured creditor with a claim for $8,952.14. The debt was for an unrelated business obligation between Cut Rate and Van Dorn. (See Cut Rate's "Memorandum of Law in Support of Third-Party Defendant's Motion to Dismiss" at 3.) On April 26, 1984, Cut Rate's Plan of Reorganization was confirmed.
On June 25, 1984, Acevedo commenced this action in District Court against Van Dorn, alleging that the machine Van Dorn sold to Cut Rate was defectively designed, and caused Acevedo's August, 1981 accident and injuries. The subject of Cut Rate's motion to dismiss is Van Dorn's subsequent Third-Party Complaint against Cut Rate for contribution and indemnification. The parties agree that prior to Acevedo's suit on June 25, 1984, Van Dorn had no knowledge of Acevedo's accident nor of the possibility of his claims. (See Certification of Charles D. Cline, dated February 5, 1986, ¶ 4, and Bottari Aff. ¶¶ 10-14.)
CONTRIBUTION AND INDEMNITY CLAIMS ARE ORDINARILY PRE-PETITION CLAIMS 11 U.S.C. § 101(4)
The issue the parties briefed is whether Van Dorn's claim arose pre-petition or post-petition. The parties presumed that if Van Dorn's claim for contribution and indemnity arose before Cut Rate's bankruptcy was filed, the claim would be subject to the jurisdiction of the Bankruptcy Court. Conversely, if the claim arose post-petition, Van Dorn's case could proceed in District Court.
The leading case on the issue is a controversial decision from the Third Circuit. In Matter of M. Frenville Co., Inc., 744 F.2d 332 (3d Cir.1984), cert. denied, 469 U.S. 1160, 105 S. Ct. 911, 83 L. Ed. 2d 925 (1985), the court held that a claim arising post-petition for indemnity and contribution stemming from pre-petition negligence is not subject to bankruptcy administration, because under New York state law, indemnity claims arise only after the underlying cause of action is commenced. The Second Circuit, however, has suggested in dicta possible disagreement with the Frenville decision:
We are not as certain as the District Court that, if we reached the issue, we would follow Frenville and hold the stay inapplicable to Paine Webber's third-party complaint. The broad definition of "claim" in the Bankruptcy Code, a "right to payment, whether or not such right is . . . unliquidated . . . contingent . . . unmatured . . .," 11 U.S.C. § 101(4)(A), creates a substantial question whether the stay applies to the third-party complaint. In view of our disposition of this appeal, we do not decide that question.
In re Baldwin-United Corporation Litigation, 765 F.2d 343, 348 n. 4 (2d Cir.1985).
At least three cases subsequent to Frenville have identified the following flaws in the Third Circuit's decision that contribution and indemnity claims be treated as post-petition claims:
1) Frenville mistakenly applied state law rather than federal bankruptcy law, to determine when creditors' claims arose, counter to the Supreme Court holding in Vanston Bondholders Protective Committee v. Green, 329 U.S. 156, 161, 67 S. Ct. 237, 239, 91 L. Ed. 162 (1946). In re Johns-Manville, 57 B.R. 680, 689 (Bankr.S.D.N.Y. 1986); In re Yanks, 49 B.R. 56, 58 (Bankr. S.D.Fla.1985).
2) Congress intended an extremely broad definition of "claim" for bankruptcy administration, which would include a subrogation claim, and the Supreme Court approved that congressional intent generally in Ohio v. Kovacs, 469 U.S. 274, 105 S. Ct. 705, 83 L. Ed. 2d 649 (1985). In re Johns-Manville, 57 B.R. 680, 687-88; Matter of Balwin-United Corp., 48 B.R. 901, 903 (Bankr.S.D.Ohio 1985) citing House Report No. 95-595, 95th Cong., 1st Sess. 309 (1977); and Senate Report No. 95-989, 95th Cong. 2d Sess. 21 (1978), U.S.Code Cong. & *498 Admin.News 1978, p. 5787; In re Yanks, 59 B.R. 56, 57 citing Ohio v. Kovacs.
3) Equality among creditors under bankruptcy law is frustrated if a surety by waiting to file suit for recovery against a debtor, could prejudice the rights of other creditors. In re Johns-Manville, 57 B.R. 680, 690; In re Yanks, 59 B.R. 56, 56 citing Williams v. U.S. Fidelity & Guaranty Co., 236 U.S. 549, 557, 35 S. Ct. 289, 291, 59 L. Ed. 713 (1915).
Since the Second Circuit appears to be leaning away from Frenville, and since recent case law has exposed significant shortcomings in the case, this court would decline to follow Frenville, and find instead that Van Dorn's claim for indemnity and contribution is a pre-bankruptcy petition claim against the bankruptcy estate, subject to Bankruptcy Court jurisdiction.
VIOLATION OF THE AUTOMATIC STAY 11 U.S.C. § 362
In order to insure exclusive Bankruptcy Court jurisdiction over a debtor's financial affairs, 11 U.S.C. § 362 automatically stays the commencement of a judicial proceeding outside of Bankruptcy Court by a pre-petition creditor against a debtor, until the debtor's bankruptcy is closed or dismissed. The automatic stay does not prohibit the prosecution of an action against a debtor based upon a claim that arose after the filing of the bankruptcy petition. In re M. Frenville Co; Turner Broadcasting Sys. Inc. v. Sanyo Elec., Inc. 33 B.R. 996 (Bankr.N.D.Ga.1983), aff'd 742 F.2d 1465 (11th Cir.1984). In light of the court's suggestion that Van Dorn's claim arose pre-petition, the court suggests that Van Dorn must move to vacate the automatic stay before proceeding further in District Court. In light of the court's suggestion below that Van Dorn's claim is non-dischargeable in bankruptcy, the court would be inclined to grant a motion to vacate the stay for "cause" under 11 U.S.C. § 362(d)(1).
VAN DORN'S CLAIM IS NON-DISCHARGEABLE
The court presumes that non-dischargeability constitutes "cause" to lift the automatic stay against litigation of a claim, but the parties did not brief the nondischargeability issue in this case: whether a creditor who is unaware of his claim against a debtor before the bankruptcy plan is confirmed can later obtain a non-dischargeable judgment of his claim.
11 U.S.C. § 1141(d)(1)(A) provides as follows:
(d)(1) Except as otherwise provided in this subsection, in the plan, or in the order confirming the plan, the confirmation of a plan
(A) discharges the debtor from any debt that arose before the date of such confirmation, and any debt of a kind specified in section 502(g), 502(h) or 502(i) of this title, whether or not
(i) a proof of the claim based on such debt is filed or deemed filed under section 501 of this title;
(ii) such claim is allowed under section 502 of this title; or
(iii) the holder of such claim has accepted the plan;
In short, the Code provides generally that a creditor of a Chapter 11 debtor corporation loses his pre-petition claims after the debtor's bankruptcy reorganization plan is confirmed, even if he was not notified of the bankruptcy or his right to a share of the bankruptcy estate.
Four Circuit Courts have found 11 U.S.C. § 1141(d)(1)(A) and its predecessor statutes unconstitutional, relying on Mullane v. Central Hanover Bank and Trust Co., 339 U.S. 306, 70 S. Ct. 652, 94 L. Ed. 865 (1950) and City of New York v. New York, New Haven & Hartford Railroad Co., 344 U.S. 293, 73 S. Ct. 299, 97 L. Ed. 333 (1953). Broomall Industries v. Data Design Logic Systems, 786 F.2d 401 (Fed.Cir.1986); Reliable Electric v. Olson Construction, 726 F.2d 620 (10th Cir.1984); In re Intaco Puerto Rico Inc., 494 F.2d 94 (1st Cir. 1974); In re Harbor Tank Storage Co., 385 F.2d 111 (3d Cir.1967). All four Circuit Court decisions hold that 11 U.S.C. § 1141(d)(1)(A) denies creditors due process *499 when creditors have insufficient notice of the bankruptcy case to file a claim. In the opinion of this court, due process should also require that a debtor notify a creditor of his claim when the creditor is unlikely to know about the claim otherwise. A creditor who is notified of the bankruptcy but not of his claim is in the same position as a creditor who has notice of his claim, but not of the bankruptcy.
In all bankruptcy cases, the debtor must list all claims against the bankruptcy estate. 11 U.S.C. § 521. As noted above, the definition of "claim" is very broad under 11 U.S.C. § 101, and properly includes causes of action for indemnity and contribution.[1] Injured employees in New York State often sue manufacturers of their employers' machines, and subsequently, those manufacturers commonly seek indemnity and contribution from the employer. See Dole v. Dow Chemical Co., 30 N.Y.2d 143, 331 N.Y.S.2d 382, 282 N.E.2d 288 (1972); N.Y. CPLR Art. 1403 et seq. Since Cut Rate knew that Mr. Acevedo was injured on a Van Dorn machine before the bankruptcy, they should have told Van Dorn about the accident. In this case, the debtor's schedules filed with the bankruptcy petition do not list Van Dorn as having an unliquidated contingent claim, and the parties do not dispute that Van Dorn had no other notice of its claim.[2] Therefore, 11 U.S.C. § 1141(d)(1)(A) unfairly strips Van Dorn of its claim, and consequently, the court suggests that Cut Rate's claim is non-dischargeable in bankruptcy.[3]Reliable Electric v. Olson Construction, 726 F.2d 620, 622-23.
CONCLUSION
In summary, the court finds that indemnification and contribution claims stemming from pre-petition injuries generally fall under the debtor's reorganization in bankruptcy. In this case, the court respectfully suggests that since the debtor failed to notify Van Dorn of its potential claim, the claim is non-dischargeable. Since the claim is non-dischargeable in bankruptcy, this court would be inclined, based on the facts before it today, to vacate the automatic stay against actions against the debtor, provided that Van Dorn makes such a motion (or submits a stipulation to be so ordered) under 11 U.S.C. § 362(d)(1).
NOTES
[1] Contingent, disputed and unliquidated claims are often difficult to estimate. Nonetheless, such claims are accounted for in 11 U.S.C. § 502(c).
[2] Naturally, the debtor must file his petition in good faith, and creditors must file their claims in good faith. In this case there is not a hint of collusion between Van Dorn and Cut Rate to defer Van Dorn's claim, nor does Cut Rate suggest that Van Dorn was playing possum with the bankruptcy estate to obtain a non-dischargeable judgment.
[3] Cut Rate creditors who are provided for under its reorganization plan will suffer some loss if Van Dorn obtains a non-dischargeable judgment larger than Cut Rate's insurance coverage. Those creditors, however, share the responsibility for their loss. The creditors had numerous opportunities to examine the debtor to insure that his plan included all claims, and subsequently, the creditors voted to accept Cut Rate's plan. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1545003/ | 97 N.J. Super. 428 (1967)
235 A.2d 231
STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT,
v.
ROGER L. BURGESS, DEFENDANT-APPELLANT.
Superior Court of New Jersey, Appellate Division.
Argued October 16, 1967.
Decided November 6, 1967.
*431 Before Judges KILKENNY, CARTON and MOUNTAIN.
Mr. Dimitry G. Nicola argued the cause for appellant.
Mr. Lawrence S. Schwartz, Assistant County Prosecutor, argued the cause for respondent (Mr. Brendan T. Byrne, County Prosecutor of Essex County, attorney; Mr. James R. Zazzali, of counsel and on the brief).
The opinion of the court was delivered by CARTON, J.A.D.
Defendant was convicted by a jury of conspiring to obtain money by false pretenses N.J.S. 2A:98-1. He seeks a reversal on the grounds that the indictment under which he was charged was fatally defective and that certain other errors were committed by the trial judge.
The indictment charged that defendant Burgess and another defendant (Mansueto) conspired with Solomon and Coleman (who were not named as co-defendants) to commit the crime of obtaining money by false pretenses N.J.S. 2A:111-1.
The overt acts detailed in the indictment allege that defendant gave a bad check in the amount of $73.05 to Solomon on April 15, 1965 and that Solomon cashed it and gave some of the proceeds to defendant. Further, on July 23, 1965 defendant and Mansueto allegedly drafted another bad check in the amount of $93.45 and then gave it to Coleman, who cashed it and divided the proceeds with Mansueto.
Mansueto pleaded guilty to the indictment. Thus, trial on the charge of conspiracy proceeded against defendant Burgess alone. Solomon testified on behalf of the State. He stated that he knew defendant Burgess and that he had received from him the $73.05 check in April 1965. They made an arrangement whereby Solomon would cash the check and give defendant $10 or $15 out of the proceeds. Several days later, Solomon cashed the check at Wee Willie's Tavern and thereafter gave defendant $10 or $11.
*432 Coleman testified on behalf of the State. He outlined the circumstances surrounding the cashing of a second check on July 23, 1965. Coleman, accompanied by Leon Knight, saw defendant on the street and the latter introduced him to Mansueto, who was with defendant. Mansueto asked Coleman if he would like to cash some checks and the latter said that he would. Defendant Burgess was standing "on the side," some seven feet away. The four men drove off in Mansueto's car to Coleman's home to pick up identification cards in the name of Joseph Hernandez which Coleman had found. Mansueto examined the identification, pulled out a check from under the seat cover of the car, and filled it out with the name "Joseph Hernandez." Driving to a nearby supermarket, Coleman cashed the check, obtaining $93.45 in proceeds which he handed over to Mansueto in the car. The latter then gave Coleman $20.
Mansueto corroborated Coleman's testimony generally. He also stated that he and Burgess had gotten blank checks "off of some fellow" and were keeping them under the seat cover of the car, and that he and Burgess had made plans to cash the checks because they needed money.
Also produced as witnesses by the State were Mr. Fitten and Mr. Cohen who testified that the $73.05 and $93.45 checks respectively were not authorized checks on their accounts. There was testimony from the persons who had paid the checks and from the officer who investigated the passing of the two checks and arrested Solomon, Coleman and Burgess.
Defendant's motion at the end of the case to dismiss the indictment on the ground that the State had failed to make out a prima facie case was denied. He thereupon took the stand on his own behalf and denied any participation in the transactions. On cross-examination, he admitted a record of several previous convictions for various crimes.
Defendant argues that he was prejudiced by the joinder of two conspiracies in the same count of the indictment; that each conspiracy was separate and distinct in *433 time and purpose, and that there was no showing the two conspiracies were part of a common scheme, the only relationship between the two transactions being defendant's participation in each. The record supports defendant's contention that two separate charges of conspiracy are made in the indictment. Properly they should have been charged in two separate counts, rather than as a single count. See R.R. 3:4-7; State v. Torrance, 41 N.J. Super. 445, 452 (App. Div. 1956), certification denied, 23 N.J. 59 (1956). Further, it is evident that what happened on April 15, 1965 in the check-passing episode between defendant and Solomon was in no way related to the July incident in which defendant, Coleman and Mansueto were involved.
However, defendant made no motion before trial to object to the joinder of the two offenses charged in the indictment. The rules require that an objection to such a defect must be raised by a motion before trial, and failure to do so constitutes a waiver of the defect. R.R. 3:5-5(b) (2). Nor was there any objection to the proofs which showed two conspiracies rather than a single offense. Likewise, no motion was made to strike either of the conspiracies or the proof relating thereto before summation of the case to the jury.
Thus, the question is whether there was plain error committed by the trial court in allowing the proofs of the two conspiracies to be submitted to the jury when only one conspiracy was charged in the indictment. The inquiry is whether the variance between the offense charged in the indictment and the proof adduced at trial substantially affected the rights of defendant by hindering the preparation of his defense or by subjecting him to another prosecution for the same offense. Berger v. United States, 295 U.S. 78, 81-82, 55 S.Ct. 629, 79 L.Ed. 1314, 1317-1318 (1935).
In Berger, as in the case before us, two conspiracies had been proved although only one had been charged in the indictment. We note, however, that Berger, unlike defendant herein, was involved in only one of the illegal transactions. *434 The court was concerned with a transference of guilt across the lines of the separate conspiracies and the consequent prejudice to Berger. Notwithstanding such a possibility, the Supreme Court concluded that the multiple trial and joinder of the conspiracies had not been prejudicial.
Defendant relies upon Kotteakos v. United States, 328 U.S. 750, 66 S.Ct. 1239, 90 L.Ed. 1557 (1946), in which the Supreme Court reversed the convictions of several defendants on the ground that a material variance between the charge of one conspiracy in the indictment and the proof of eight or more conspiracies at trial was prejudicial. However, the court, recognizing the continuing validity of Berger, distinguished that case from the situation before it, saying:
"The sheer difference in numbers, both of defendants and of conspiracies proven, distinguishes the situation. Obviously the burden of defense to a defendant, connected with one or a few of so many distinct transactions, is vastly different not only in preparation for trial, but also in looking out for and securing safeguard against evidence affecting other defendants to prevent its transference. * * *." (328 U.S., at pp. 766-767, 66 S.Ct. 1249, 90 L.Ed. at pp. 1567-1568)
Thus, in Kotteakos, as in Berger, the issue was prejudice to one not involved in all the conspiracies proved. In this case, the absence of prejudice is even more clear. Defendant was tried alone and defendant had participated in both conspiracies. Transference of the guilt of another was consequently impossible.
We are satisfied that the evidence fully justified the jury's finding that defendant was guilty of conspiracy and, under the circumstances, that no prejudice has been shown so as to constitute plain error.
We perceive no substance to the other claims of error advanced by defendant. The indictment was clearly adequate and contained sufficient particulars to inform him fully of the offense being charged. It actually sets forth the details of the offense with considerable particularity. Furthermore, *435 had defendant felt that the charge was not sufficiently specific to enable him to prepare a defense, he could have applied for a bill of particulars. R.R. 3:4-6. He made no such application.
Defendant's claims that he was prejudiced by the court's ruling as to the admissibility of evidence are unfounded. In the first place, there was no objection made to the admissibility of the evidence which he now claims was erroneously permitted. Nor was there error in the admission of the testimony of the witness Solomon solely because he was a co-conspirator. A defendant may be properly convicted even on the uncorroborated testimony of another conspirator despite the fact that the co-conspirator was a user of drugs and had a previous criminal record. The issue before the jury was one of credibility and it was up to the jury to determine what weight should be attributed to it. Furthermore, there was other corroborating evidence which the jury could consider in the determination of defendant's guilt.
Finally, the claim that evidence of a defendant's prior criminal record should not be admitted because of remoteness or its inherent tendency to create prejudice has been resolved contrary to this contention. State v. Hawthorne, 49 N.J. 130 (1967).
Affirmed. | 01-03-2023 | 10-30-2013 |
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